Russia has spent half of its "rainy-day fund" during invasion of Ukraine

Ukrainska Pravda
·2 min read
9
Russian rubles. Stock photo: Getty Images
Russian rubles. Stock photo: Getty Images

The Russian Ministry of Finance has spent 4 out of 9 trillion roubles [roughly US$45,5 billion out of US$102,4 billion], or almost half of the liquid part of the National Wealth Fund (NWF), which is the central reserve for a rainy day, in 2023.

Source: Meduza, a Russian Latvia-based media outlet

Details: Russia's National Wealth Fund, formerly known as the Stabilisation Fund, was created to reduce the dependence of the Russian economy on commodity prices.

However, after Russia's invasion of Ukraine and the introduction of sanctions on Russian oil, which included a price cap and limits on direct supplies to the West, the price became too volatile, with the rouble exchange rate also becoming less predictable.

Throughout the first half of 2023, Russian oil was traded at a discount; the rouble was relatively strong. Therefore, the required volumes were not acquired, with foreign currency being sold from the NWF. Russia's Ministry of Finance received roubles as compensation. However, prices surged in the summer, and the rouble weakened, so the Russian authorities were finally ready to replenish the piggy bank.

Meanwhile, the Finance Ministry had a busy year in terms of expenditure, primarily driven by the need to finance military needs. National defence and national security items had a 60% increase compared to 2021.

This resulted in budget expenditures exceeding the statutory limit by RUB 3 trillion [roughly US$34.1 billion], reaching RUB 32 trillion [roughly US$363.7 billion]. The budget deficit was also higher than projected. The authorities placed federal loan bonds throughout the year and, in doing so, borrowed RUB 2.5 trillion [roughly US$28.4 billion]. Moreover, they devised and collected new taxes. The Ministry of Finance also got lucky with oil and gas revenues, topping forecasts.

However, this proved to be insufficient, so in December, the Russian Ministry of Finance sold €500 million, CNY 115 billion [roughly US$16,09 billion] and 232 tonnes of gold from the NWF and used the proceeds of RUB 2.9 trillion [roughly US$32.9 billion] to cover the deficit. This is the highest possible amount for 2023.

This has reduced the liquid part of the NWF to RUB 5 trillion [roughly US$56.7 billion], although, at the beginning of the war, it stood at almost RUB 9 trillion [roughly US$102.4 billion].

Learn more: What's going on with the Russian economy?

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