Russia's National Welfare Fund doubled in July to $124bn

Russia's National Welfare Fund doubled in July to $124bn
Russia's National Welfare Fund doubled in July to RUB7.868 trillion ($124bn) taking it to 5.2% of GDP, close to the threshold 7% of GDP after which the government can spend the excess / bne IntelliNews
By bne IntelliNews August 4, 2019

Russia's National Welfare Fund (NWF) doubled in July, increasing by RUB4.105 trillion, to RUB7.868 trillion, and in dollars terms by $64.479bn, to $124.137bn, the Ministry of Finance of Russia reported on August 2.

As of July 1, 2019, the amount of the fund was RUB3.763 trillion, which was equivalent to $59.658bn.

The sudden rise was caused by the Ministry of Finance adding cash to the NWF it siphons off from oil revenues as part of its sterilising process into temporary accounts.

Notably, the liquid part of the NWF reached 5.7% of GDP, approaching the threshold of 7%. The rules governing the fund say that above the threshold the government can spend any surplus as it likes. The Finance Ministry estimated that NWF will break 7% of GDP by the end of 2019, with funds available to spend estimated at RUB1.8 trillion in 2020 and RUB4.2 trillion in 2021. Recently there has been a vigorous debate on what to do with this extra money.

Proposals for spending the extra funding from NWF vary from supporting exports and investing in facilitating selling Russian produce abroad by the Ministry of Economic Development, to investing in infrastructure projects proposed by the Finance Ministry, whereas the Central Bank of Russia (CBR) worries that this will stoke inflation and wants to hike the bar further.

Unconfirmed reports suggested that NWF is also eyed for supporting the troubled downstream oil industry, and construction of liquefied natural gas (LNG) tankers for Novatek gas major.

The ministry reported that in July, additional oil and gas revenues from the budget for 2018 were transferred to the fund in foreign currencies of the amounts of $30.207bn, €25.743bn and GBP5.065bn.

As of August 1, 2019, in separate accounts for funds of the NWF were $45.527bn, €39.202bn, GBP7.679bn and RUB98.8mn, according to the CBR. 

Another $3bn was invested in Ukraine's sovereign bonds, which the country defaulted on. RUB585.4bn was deposited with VEB.RF. More was invested to cover Russian issuers related to the implementation of infrastructure projects to the tune of RUB169.1bn and $4.113bn. Another RUB138.4bn was placed on deposits with VTB and Gazprombank in order to finance infrastructure projects. RUB279bn was invested in preferred shares of banks.