The Russian Finance Ministry announced this month it has transferred last year’s budget surplus to the country’s National Welfare Fund (NWF), which now amounts to about 12,200 billion rubles ($157.2 billion), or 11% of Russia’s GDP, TASS reported.
The reserve fund can be used to cover a budget deficit in times of crisis and held some 8 trillion rubles ($123 billion) at the start of March, or 7% of GDP, according to the Bank of Finland’s Institute for Economies in Transition (BOFIT).
Finance Minister Anton Siluanov said earlier this month that the current crisis would blow a 3 trillion hole in the budget that will be covered by withdrawals from the NWF. If nothing changes and Russia continues to run 3 trillion budget deficits because of persistently low oil prices then there is enough in the fund to last four years – and that is without cutting spending from the planned budget due to run to 2022 or raising taxes. Siluanov said earlier that the amount of money in reserves was enough to endure a decade of low oil prices.
The reason for the sudden jumps in the NWF recently is due to an accounting quirk, according to bne Intellinews. The fund is administered by the Bank of Russia which reports on its size.
However, the Ministry of Finance is the one that collects the taxes and oil duties that feed the fund, which it holds in special accounts before formally transferring this cash to the fund periodically. Normally that money comes from surplus revenues earned from oil exports when the prices are over $42 per barrel, but this latest uptick was due to the Ministry of Finance transferring the budget surplus left over from 2019 to the NWF war chest. (This so-called budget rule has been suspended until April, allowing the Ministry of Finance to spend surplus oil revenues rather than send them to the NWF.)
More money is being made available to fight the coronavirus (COVID-19) crisis as a planned sale of the central bank’s stake in retail banking giant Sberbank to the Ministry of Finance will mean the transfer of another dollop of money to the NWF. In February, the CBR and the Ministry of Finance agreed that the central bank would sell its stake (50% and one share) in Russia’s largest bank to the Ministry of Finance, which increases the central bank’s distribution of profits to the state.
