As the Kremlin struggles to attract foreign investors for its ambitious spending plans, the government may turn to Russia’s National Wealth Fund for local projects next year, Bloomberg writes.
The Finance Ministry has moved to ease the budget rule and it will review any investments that make use of the fund with the central bank in order to assess any possible monetary impact, First Deputy Prime Minister Anton Siluanov told reporters Saturday at the St. Petersburg International Economic Forum (SPIEF).
“Foreign investment is falling, we need internal investors,” Siluanov said. “We could deploy the funds on the understanding that they would be returned and in projects that attract investment from private businesses.”
Previously, the Finance Ministry was against spending the fund’s money in the home market, fearing it could accelerate inflation. But now, according to Bloomberg, it is searching for money to implement President Vladimir Putin’s National Projects initiative, which he hopes will help to double the growth rate by the end of his current term in 2024. Russia has the lowest direct foreign investment as a percentage of economic output of any developing country.
The plan may meet resistance at the Bank of Russia, which has helped bring inflation down to historic lows. Governor Elvira Nabiullina said at SPIEF last week that Russia needed structural reform to raise growth rates rather than to throw money at development.
“There’s the desire for an immediate impact here and now, and suddenly the question of state investment, spending from the National Wellbeing Fund that we’ve saved up, and softening monetary policy,” Nabiullina said. “Softening monetary policy when the real restraints are elsewhere will not provide growth but rather create new inflationary risks.”
Russia established the National Wealth Fund to divert revenue from oil and gas sales in order to reduce the state budget’s exposure to price fluctuations. Its coffers swell when the price of oil, Russia’s most valuable export, rises above $40 a barrel.