Russia was left without a Reserve Fund: what’s next?

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Россия осталась без Резервного фонда: что дальше?

DW understand why the Reserve Fund was abolished and combined with the national wealth Fund of Russia, how much money remains in the past and what they will spend power.

Since the beginning of 2018 in Russia abolished the Reserve Fund, which has financed the budget deficit of the country. Technically it merged with the national welfare Fund (NWF). DW understand what it’s done, how much money remains in the national welfare Fund of Russia and what they will spend.
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Amendments to the Budget code of the Russian Federation, providing for the merger of the two funds, was adopted last summer. The Finance Ministry had calculated in advance that the Reserve Fund by the beginning of 2018 will have been exhausted, and the Russian budget in the coming years will remain scarce. Therefore, the Fund, which was originally intended only for financing sustainable pension of the Russians, now takes over the functions of the Reserve Fund and will be spent to cover the budget deficit.

Russian Finance Minister Anton Siluanov explained that the merger of the funds must provide “more maneuverability for use of the reserve”.

“Instead of money for future generations – the deficit in the budget”

Reserve Fund and national welfare Fund was established in 2008 on the basis of which appeared four years earlier, the Stabilization Fund, which received oil and gas windfall. Evaluation of the Department of international capital markets, Institute of world economy and international relations RAS Yakov Mirkin, a division of the stabilization Fund at the time pursued the idea of “withdraw from its current turnover of surplus money and set it aside for future generations” in the NWF.

Now this idea is getting away, he said “the Tape.ru”. “NWF loses the purpose as Fund for future generations. In first place comes the use of the Fund as a reserve for a rainy day, and as a money bag for different target programs”, – the expert believes.

Similarly spoke about the merger funds and the chief economist of alpha Bank Natalia Orlova: “national welfare Fund – a Fund for future generations, the funds were to be used in the case of structural reforms. Until we have such a scenario. The challenge now facing the Ministry of Finance before the budget is still to begin using the NWF in the case of volatility of oil prices or other negative developments for the budget.”

How much money is left?

According to the law, by February 1, the remaining funds of the Reserve Fund will have to enroll in the NWF. However, apparently, it will be a mere formality. A few days before the New year, Siluanov said that by January 1, the Reserve Fund will be fully spent. In early December it was still 994 billion rubles a year earlier – two trillion rubles.

In the NWF, according to official data, on December 1, 2017 3.9 trillion rubles for the year decreased by 700 billion roubles. The January figures yet, but the Ministry of Finance hoped that by the beginning of 2018, the Fund will be 3.7 trillion rubles. A considerable part of this money is invested in assets and infrastructure projects. The amount of available funds in the NWF is about 2.3 trillion rubles.

How to spend the national wealth Fund in the coming years

According to the plans of the Russian authorities, in 2018, the Russian budget deficit will amount to 1,271 trillion rubles. Of these, 1,114 trillion roubles it is planned to pay the expense of the NWF. At the same time, the Fund should be replenished to 717 billion rubles. However, at the end of December, the Finance Minister noted that part of expenses of Federal agencies for 2017 are to be transferred to the current year, from-for what the budget deficit actually may be higher than the initial forecast. Will additional costs be repaid by reserves of the national welfare Fund, Anton Siluanov explained.

In 2019-2020, the state budget will remain deficit – expense exceeds income and 819 870 billion respectively. However, the government hope to cover this difference of NWF funds to spend in the future almost do not need – only about eight billion roubles for two years. The rest of the Fund continues to be allocated to the maintenance of the balance of the pension insurance system and the co-financing of voluntary pension savings.

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