the Pandemic made a regular character news the national welfare Fund (NWF) — the main reserve a jug of the government. When it became clear that a couple of hundred billion to rebuild the economy from coronaries will not get the Russian reserves laid special and high hopes. And no wonder: until the oil is dramatically cheaper, the government is throwing money into anti-crisis packages, and the budget surplus turned into a deficit, the Fund is paradoxically filled. In March it was 8.2 trillion rubles, and in may — already 12.4 trillion. Tell, what Russia needs reserves and depreciating ruble as the country enriches.
Three funds in one
Over the years of its existence, the Russian reserve potbelly has experienced a number of mergers and renamings. The national welfare Fund, which is now at the hearing, appeared only in 2018, although to lay in supplies, Russia began in the early 2000’s. This was made possible when the country emerged from the crisis of the 1990s, thanks to much more costly oil. Prior to that, the savings for a rainy day could not be and speeches: the state is mired in loans defaulted, devalued the ruble, and every penny went to urgent needs.
In the second half of 1999, a miracle happened: the price of oil for the first time in several years has risen above $20 per barrel. This has allowed us to increase revenues and to gain relative financial stability. According to the Finance Ministry, in 2000, additional revenues from higher oil prices amounted to 300 billion rubles. In 2001 Vladimir Putin with the filing of then-Finance Minister Alexei Kudrin proposed creating a reserve where it is possible to postpone the surplus from the sale of oil. Thus, in 2004 appeared the ancestor of the current national welfare Fund — a Stabilization Fund of Russia. The Fund performs several functions: it provided additional stability to the public finances and served as a source of financing of investment programs. In fact, it was the assets which could directly control the government, not the Parliament approving the budget. First savings, the state decided to dispose of this: in 2005, the stabilization Fund directed the payment of external debt of Russia (to the International monetary Fund and the countries — members of the Paris club) and the deficit of the Pension Fund of the Russian Federation.
In 2006, Putin announced the idea of transforming the stabilization Fund. In his Budget message (it was that), the President proposed to adopt the budget not for one but for three years and change in this regard, the structure of the reserves. In 2008 the Stabilization Fund was abolished. It was divided into Reserve Fund and national welfare Fund. At the time of separation in the stabilization Fund remains a 3.85 trillion rubles. After the spin-off of two funds attributed toand different functions. The reserve Fund was intended to cover the budget expenses in the case that energy prices are greatly reduced, as well as to stabilize the economy during the crisis. NWF was required to support the pension system. From it, for example, was co-funded by voluntary pension accumulation of Russians. However, then the functionality of the NWF has been expanded and the Fund was used to Finance infrastructure projects.
In 2018 double a jug of Russia again waiting for the conversion, but for an emergency reason. In 2017, the Reserve Fund has been completely depleted: it has fulfilled its purpose and to cover the budget deficit resulting from the crisis 2014-2016. After this Reserve Fund ceased to exist: all functions took over NWF.
the Foundation of the national state is the model instrument of reservation for the purposes of managing financial and economic risks, and management indicators of monetary circulation in the country, said in an interview with “MK” doctor of Economics, Professor Financial University under the Government of the Russian Federation Konstantin Ordov.
“in General, the market economy in its classical form does not imply the necessity of forming a substantial volume of reserve funds, because international trade allows a free rate fixing to balance industrial and commercial potential of different countries. However, the countries with poorly diversified economies, such as Russia, the existence of social obligations and other non sequestering (not reducing) government spending causes the need to build reserves for a rainy day. This day is considered to be an economic crisis or a period of adverse world price trends on the main commodity or product, which is the basis of the revenue side of the budget,” he said.
By the way, in comparison with other countries drives Russia in a very good position. The national welfare Fund is part of the international reserves of the Russian Federation, although it has a number of limitations in the directions of use. If you compare the volume of international reserves of the States at the end of the first quarter of 2020, Russia has occupied 4-e a place in the world with the sum of $565 billion the Most Thrifty was China with us $3.1 trillion, followed by Japan with $1.4 trillion and Switzerland — from $989 billion.
Reserves went into business
Where the funds were taken and how money was used? The Stabilization Fund was the additional revenues from oil sales above a certain level. The money was invested in foreign currency and debt obligations. The legal successor to the stabilization Fund was a Reserve Fund. It, too, was a windfall from oil, then invested in currency and debt obligations. Thus, the Fund could not exceed 10% of GDP (later 7%). When The reserve Fund has reached the maximum level allowed, the rest of the surplus accumulated in the national welfare Fund. By the way, originally he was even more pretentious title: the Fund for future generations. This name was suggested for the initial purpose of the NWF is the maintenance of the pension system. But when a function is expanded, a money Fund was permitted to spend on loans to banks which were then to return to the Fund a profit from the investment. So, the credit funds of the NWF was built, the Crimean bridge, Central ring road in Moscow and the Moscow region, toll highway Moscow—St.-Petersburg. In short, the principle of filling funds boils down to a simple formula: in a jug go sverhdorogoy from oil sales are invested in financial instruments or investment for more profit. That’s the pattern of investment on a national scale.
NWF in the latest version also filled due to additional oil and gas revenues. Strap clipping was of $42.2 per barrel Urals. When the “black gold” was worth $60 and above, in a jug was a lot of money. But in addition Russia received income from managing the Fund — the investment. Management of the NWF is engaged in the Ministry of Finance, in some cases, the Central Bank. The Ministry of Finance of the scrolls the Fund in two ways. First — invests in the purchase of foreign currency (Australian, canadian and United States dollar, Euro, pound sterling, Swiss franc and the yen). Second — places in different assets: government bonds of foreign countries bonds of international organizations, Central banks shares of Russian companies related to the implementation of infrastructure projects to deposits in banks and others.
A diversified investment portfolio brings the FNB dividends and currency differences. For example, the exchange rate difference from revaluation of the Fund’s assets for the period from 1 January to 30 April 2020 amounted to 1 trillion 197 billion. In turn, due to the placement of funds in financial assets in the first four months of the year, potbelly has “earned” 9,175 billion. Due to this, the national wealth Fund during the crisis not only is not reduced on the background of record low oil prices, but also growing. From March to April of this year, NWF has increased by 4.2 trillion rubles, while the average price of oil in March–April ranged from $20 to $30 per barrel.
Here is the answer to the question of why the hydrocarbons were worthless, and NWF filled: potbelly swelled due to depreciating against the background of oil the ruble. Worked out a simple rule: if the time to invest in a foreign currency, on exchange you can earn.
“Despite the crisis and fears for the safety of the Fund, in March 2020, it increased by 34% to 12.9 trillion This was the result features zachithat calculates the summary of funds to the accounts of the Fund, which led to the same sharp increases in July 2019 — 108%, in June 2018 at 23%,” — says Konstantin Ordov.
the devaluation of the ruble is a powerful tool for filling the NWF, so full depletion of the capsule in the near future, however. “The current situation of commodity prices and demand for anti-crisis measures of financial support does not allow to count on a comparable momentum in the next year. But this does not mean that the volume of ruble denominated funds of NWF in the next year will be reduced. The rise of the dollar for 10 rubles can additionally bring to the NWF worth about 1.7 trillion rubles as foreign currency transactions which is significantly less than what the Government spent on anti-crisis measures,” says Professor Ordov.
According to experts, in the last decade in General has become very fashionable and is sometimes very effective to use reserve funds to manage the exchange rate. That’s just not in favor of national currency. “Parade of devaluations” 2015 and 2018 showed that the reserve funds are few who are willing to use to maintain excessively strong national currency”, — said our interlocutor.
the passion of the pod
Funds from the national welfare Fund by law cannot be spent on the needs of the budget whenever necessary. Actually, this was the idea of Alexei Kudrin in the creation of the stabilization Fund. The Finance Minister said then: “Spend the stabilization Fund inside the country — it’s just the destruction of the economy”. However, in crises of the pods still had to print out for internal purposes. In 2008-2009 at the expense of the Reserve Fund and national welfare Fund had to rescue the financial system from crisis. Ironically this had to do fighter for the inviolability of the reserves Kudrin. He was allowed to invest up to 40% of the national wealth Fund in ruble and foreign assets, as it was before. But Kudrin had been opponents. The main ideologue of the investments of the NWF in the economy was at that time assistant to the President Andrey Belousov is a former economic development Minister and now first Deputy Prime Minister.
When Kudrin in 2011 resigned, the country’s priorities have changed. The Ministry of Finance under the leadership of Anton Siluanov failed to protect the Fund from expenses. Pods were allowed to spend on needed projects for the country. In the end, bids from state-owned corporations, banks on the investment by NWF exceeded the amount of the Fund. In 2015, the portion of the funds went to investment projects: in particular, decided to support companies affected by sanctions.
After the abolition of the Reserve Fund to stay afloat NWF has created a new fiscal rule. Be spent, the Fund may, but only if its liquid part (real money accounts, not debt instrum��options) exceeds 7% of GDP. Reserves can’t go to target the needs of the economy, and can only compensate for the fall in budget expenditures due to falling oil prices.
To coronaries at the expense of funds of the NWF was to be financed by investment projects in the framework of national projects. However, just to take the money out of the capsule was impossible. Then the authorities came up with a graceful maneuver with the purchase of Sberbank shares at the expense of the NWF. Controlling stake was acquired as an asset that is not prohibited. But since the seller was the Bank of Russia, the profits from sales have gone from state to state, but not in the emergency Fund, and the budget. So about 2 trillion rubles withdrawn from reserves and taken to the Treasury. Here are just a coronavirus confused said: now the money will go not on the investment, and to Finance the economic recovery plan. According to the Prime Minister Mikhail mishustina, the exit strategy from the crisis will cost the government 5 trillion rubles.
the main question Remains: what is the economy going to save? “After the purchase of the savings Bank the volume of the liquid part of the Fund decreased and amounted to 8.2 trillion rubles out of the total 12.4 trillion. Stake in the Bank, in turn, has become the most significant non-liquid part of the Fund. I think that the government will retain a conservative approach to the expenditure of funds of the NWF. Hardly he will actively spend money to eliminate the budget deficit. Perhaps the authorities will go the other way: the deficit will be close due to the activity of the state in the debt market,” notes the economist “BCS Premier” Anton Pokatovich.
the Increase in public debt used to Finance anti-crisis measures, which they say our experts, is really seen by the authorities, which was confirmed by the Ministry of Finance. We are talking about the issuance of debt securities guaranteed by the state. The government is studying the question of the increase of issue volumes of the market of Federal loan bonds. Weekly OFZ bonds placed at the auctions of the Ministry of Finance, and gain professional financial market participants — banks, investment funds, management companies.
However, if the idea with the increase in government debt will fail the authorities will come to dip into the national welfare Fund. “The presence of FNB allows you to create a more stable situation in the Russian economy and Russian markets. If the state will not be able to implement the planned scale up its activities in the debt market, the use of the Fund for budget support seems most probable step taken by the authorities”, concluded Anton Pokatovich.
Experts not undertake to predict, how much is enough NWF: too volatile, oil prices, exchange rates and other variables. That’s the word from officials, it also guesses. Anton Siluanov hopes that the pod will stand up to 2024. German Gref argued that without the reduction��Oia budget of funds of the NWF “will last for several years.” One thing is clear: following their same budget rules (which could be rewritten), power wither over with gold, like a bag of bones. However, perhaps this safety net will play a role, when the day will come blacker than it is now.
