Russia’s National Welfare Fund (NWF) doubled in July, increasing by 4.105 trillion rubles, to 7.868 trillion rubles, and in dollars terms by $64.479 billion, to $124.137 billion, the Ministry of Finance said earlier this month, according to bne Intellinews.
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 sterilizing 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.
Earlier this year, unconfirmed reports suggested that NWF is also eyed for supporting the troubled downstream oil industry, and construction of liquefied natural gas (LNG) tankers for gas major Novatek.
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.