Russia will cover budget deficit with fund for rainy days in 2022, says finance minister | Investment News

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(Reuters) – Russia’s National Wealth Fund (NWF), a rain cushion containing oil revenues, will be the main source of funding for a budget deficit estimated at 1.6 trillion rubles ($21.6 billion) or more in 2022, said the Minister of Finance. Wednesday.

Russia is facing soaring inflation and capital flight while grappling with a possible default after the West imposed harsh sanctions to punish President Vladimir Putin for sending tens of thousands of soldiers in Ukraine on February 24.

“The National Wealth Fund will be the main source of spending funding in the near future,” Finance Minister Anton Siluanov said, adding that a spending limit would be imposed to prevent the fund from drying up.

“If revenues are higher than expected, we will spend less of the NWF. If not, we will spend more.”

Russia will also channel 50 billion rubles from the NWF to supplement Gazprombank’s capital, as the lender needs additional funds to carry out infrastructure projects.

Gazprombank, which has so far been spared some of the sanctions, was designated by Putin to be used by foreign buyers of Russian gas to pay for energy supplies.

Russia halted gas flows to Bulgaria and Poland after rejecting its demand for payment in roubles.

Siluanov also said his ministry was eager to adjust Russia’s fiscal rule, designed to protect Russia from swings in oil prices.

Under the current rule, Russia cannot spend more than its non-oil and gas revenue and proceeds from the sale of oil above a particular oil level. Moscow has already relaxed the rule to increase state spending and borrowing to fight the COVID-19 pandemic in 2020-21.

“Under current conditions, the old rules cannot be applied,” Siluanov said. “The Ministry of Finance has made proposals for new fiscal rules that the government is considering.”

Russia will not borrow domestically this year but could gradually start borrowing again in 2023 if inflation and OFZ government bond prices stabilize, Siluanov added.

(Reporting by Reuters; Editing by Alex Richardson and Frank Jack Daniel)

Copyright 2022 Thomson Reuters.

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