IMF advises Russia not to spend its National Welfare Fund

IMF advises Russia not to spend its National Welfare Fund
Russia’s total gross international reserves are now $491.1bn, of which $90bn is gold and $59bn is in the National Welfare Fund.
By bne IntelliNews May 27, 2019

The International Monetary Fund (IMF) advised the Russian government not to spend the money in its National Welfare Fund (NWF) and to invest it into “secure foreign assets” instead. The Russian Ministry of Finance is intending to spend some of the money in the rainy day funds on its 12 National Projects.

Russia’s total gross international reserves (GIR) is now just shy of the Central Bank of Russia (CBR) unofficial target of $500bn and was $491.1bn as of the end of April (the CBR reports the GIR levels with a month’s delay so as not to interfere with the trading on the market), of which gold made up just over $90bn and continues to increase its share in the basket.

The National Welfare Fund is currently receiving super-profits from the sale of oil: revenues earned when the price of Urals oil is above $41.6 per barrel are funneled into the fund, according to the budget rule in 2019.

The National Welfare Fund currently holds RUB3.8 trillion, or 3.6% of GDP. According to the Budget Code, after the liquid part (excluding investments already made) of the NWF reaches 7% of GDP, the money in the fund can be spent. The Ministry of Finance predicts that this will happen by the end of 2019, when the NWF will accumulate RUB7.9 trillion. 

The Russian authorities have not yet decided on what to spend the money. Economic Development Minister Maxim Oreshkin proposed directing money to lend to buyers of Russian products abroad, concessional financing when setting up production for Russian companies abroad, as well as concessional financing when creating service centres that will serve Russian products in third-country market.

Oilmen offered a simpler solution: to spend part of the funds in the NWF to compensate for their losses from the completion of the tax manoeuvre in the oil industry.


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