Russia wet day fund shrinks by $38 bln as authorities plugs deficit

Jan 18 (Reuters) – Russia’s Nationwide Wealth Fund shrank to $148.4 billion as of Jan. 1, down $38.1 billion in a month, as the federal government took out money to plug its price range deficit, knowledge confirmed on Wednesday.

The ministry stated it had spent 2.41 trillion roubles ($35.1 billion) from the NWF, a wet day fund that accumulates oil revenues, to cowl the deficit in December.

Together with heavy state borrowing at home debt auctions, the NWF – which was initially supposed to assist the pension system – has grow to be the principle supply of financing for the price range deficit since Russia invaded Ukraine final yr and was hit by waves of unprecedented Western sanctions.

The federal government additionally drew on it final yr to prop up struggling state corporations together with Russian Railways and the airline Aeroflot.

Analysts have stated Russia’s makes an attempt to plug its price range deficit by promoting international forex reserves may result in a vicious circle that pushes the rouble greater and additional reduces the Kremlin’s essential export revenues from oil and gasoline.

The dimensions of the NWF at Jan. 1 was equal to 7.8% of Gross Home Product, the finance ministry stated. However solely $87.2 billion, or 4.6% of GDP, was in liquid belongings.

At Feb. 1 final yr, three weeks earlier than the invasion, the full fund stood at $174.9 billion, or 10.2% of projected GDP.

Finance Minister Anton Siluanov stated final week that Russia recorded a price range deficit of two.3% of GDP final yr, having focused a surplus of 1% earlier than the beginning of the conflict.

In line with the price range regulation, the finance ministry can spend one other 4.2 trillion roubles, at the moment value round $61 billion, over the subsequent two years to plug the deficit.

In consequence, based on the ministry, NWF liquid funds in accounts with the central financial institution may fall to 2.3 trillion roubles or 1.4% of GDP by the tip of 2024, which the Accounts Chamber stated could be the bottom ratio for 20 years.

In an extra indication of strain on the price range, finance ministry knowledge confirmed that tax revenues from imports, that are topic to duties and value-added tax, fell by 20% or virtually 1 trillion roubles in 2022.

Imports plummeted final yr on account of Western sanctions and an exodus of Western corporations from Russia, although they started to recuperate within the second half of the yr.
($1 = 68.6950 roubles)

Reporting by Reuters; Writing by Mark Trevelyan; Modifying by Kevin Liffey

Our Requirements: The Thomson Reuters Belief Ideas.