BOFIT Weekly Review 2016/23
Russia dips further into its reserve funds
Another 390 billion rubles ($6 billion) was lifted from the Reserve Fund in May to cover the budget deficit. The Reserve Fund at the end of May was valued at 2.55 trillion rubles ($39 billion or 3 % of GDP). So far this year, about 800 billion rubles has been withdrawn from the Fund, and budget plans call for a further draining of 1.3 trillion rubles by year’s end. While the federal budget assumes an average oil price of $50 (3,165 rubles) a barrel, the actual average price of Urals-grade crude in January-May was $36 (2,560 rubles).
The value of the National Welfare Fund stood at 4.8 trillion rubles ($73 billion or 6 % of GDP) as of end-May. So far this year, about 7 billion rubles ($100 million) has been used to cover pension expenditure.
The entire Reserve Fund and about two-thirds of the National Welfare Fund are counted as part of Russia’s foreign currency reserves. The CBR oversees these assets and invests them in low-risk, highly liquid currency-denominated securities as it does with the rest of the nation’s currency reserves. The value of Russia’s foreign currency reserves does not automatically fall when money is withdrawn from the reserve funds. When the funds are used to cover expenses in rubles, the central bank exchanges foreign currency for rubles and the currency reserves remain unchanged. The value of Russia’s foreign currency reserves, which has risen slightly this year, stood at €388 billion at end-May.
Value of Russian oil funds
Sources: Macrobond, Russian Ministry of Finance and BOFIT.