The reserve fund has been exhausted: what does this mean for the inhabitants of the Russian Federation. Russia has spent the last trillion Reserve Fund is exhausted
The reserve fund of Russia, the funds in which were accumulated at the expense of oil and gas revenues, will be practically spent by the end of the year. Another 660 billion rubles will be withdrawn from the Fund national welfare(FNB). It was announced on Tuesday Finance Minister Anton Siluanov. According to the minister, a total of about 1 trillion rubles will be withdrawn from the fund. As of December 1, 2017, 992 billion rubles remained in it.
spend money Reserve Fund started back in February 2015 to close a hole in the federal budget, then its size was reduced by almost 6 times, or by 4.9 trillion rubles. Funds from the National Welfare Fund began to be spent in September this year to cover the budget deficit pension fund- about 160 billion rubles a month. By the beginning of December, 490 billion rubles had gone from the fund.
Starting next year, the National Wealth Fund will be merged with the Reserve Fund. The corresponding decree was signed Russian President Vladimir Putin July 31 this year. It will be replenished at the expense of the currency that the Ministry of Finance buys on the stock exchange, using budget revenues from oil prices above $40 per barrel.
Based on the adopted budget for 2018, it is planned to take 1.113 trillion rubles from the joint fund. According to the forecasts of the Ministry of Finance, the size of the NWF as of January 1, 2018 will be 3.7 trillion rubles.
AiF.ru asked Analyst of FG "Kalita-Finance", financial markets expert Dmitry Golubovsky what will result in the depletion of the Reserve Fund.
“There is still enough currency, because there are still funds from the National Welfare Fund. Now the Ministry of Finance is engaged in transferring money from account to account. This is due to the peculiarities of budget accounting. As for the Reserve Fund, its funds are used to pay off budget deficit, which was formed as a result of the fact that the government spends more than it earns in the face of falling oil revenues. The value of this fund depends on the cost of Brent oil in rubles. If it costs less than 3600-3700 rubles, then the government needs to take money from somewhere and plug the hole. And since oil was cheaper than this level for most of this year, we had to eat through foreign exchange reserves.
So what does running out of reserve funds actually mean? The government said that by the end of this year they will run out of funds in the Reserve Fund, next year, if the price of oil falls, the funds of the National Welfare Fund may also run out. If prices remain stable, at the current level, then nothing will happen. This situation says only one thing - that you need to start living within your means, while the cost of oil should not fall below 3800. If it is lower at the time these funds are exhausted, then this will be a one-time devaluation of the ruble. As soon as the funds run out, the ruble exchange rate will begin to be strictly correlated with the price of oil. Now the ruble exchange rate has broken away from the price of oil, we can observe a very low dependence. The course is now determined purely by the dynamics interest rates, taking into account the demand for bonds federal loan. But when there is no reserve money left, then oil will start to steer everyone. In fact, everything will be determined by what happens in the commodity market.”
In early May, the Ministry of Economic Development in its forecast admitted that by the end of 2019 the entire state money-box - the Reserve Fund and the National Wealth Fund - could be exhausted. In the Ministry of Finance, that the Reserve Fund will end in 2017. Lenta.ru was figuring out how Russia could survive without stockpiles that had accumulated over a decade.
In the past few years, both funds have been rapidly shrinking, even despite the huge gain in exchange rate differences due to the devaluation of the ruble (the funds are part of international reserves and are held in foreign currency). According to the Ministry of Finance, as of July 1, the volume of the Reserve Fund is 2.46 trillion rubles. There are 4.68 trillion rubles in the National Welfare Fund.
With the current level of the budget deficit (2.36 trillion rubles), the funds will really only last for three years. However, according to the Ministry of Finance, thanks to austerity measures, the National Wealth Fund will continue in three years, having reduced to only three trillion rubles.
And yet there is a risk of complete depletion of reserves, especially in case of unsuccessful economic conditions. However, according to the director of the Institute of Economics of the Russian Academy of Sciences Ruslan Grinberg, the depletion of the Reserve Fund is not the end of the world, since the state still has several options with which to level the lack of reserves. At least six areas are worth highlighting.
Tax increase
This option immediately comes to mind. The argument “for” is obvious - the tax burden in Russia does not exceed 35 percent of GDP, which is significantly lower than in most developed countries world, and even somewhat lower than in the developing countries of Eastern Europe. For example, in Poland this figure is 40 percent, in Estonia and Lithuania - 37 percent each. That is, there is some potential for increasing the fiscal burden.
Now the country has a moratorium announced by the president on increasing the tax burden, but in 2018 it will end. And some proposals to raise taxes are already being discussed in the State Duma and the government. In particular, the deputies allowed the introduction of a progressive scale of tax on the income of individuals. This measure will primarily affect wealthy citizens. Deputy Prime Minister Olga Golodets proposed to increase personal income tax for Russians who earn more than seven to eight million rubles a year. In addition, options are being considered to increase the value added tax ( indirect tax on consumption), as required by the IMF in Ukraine.
All these proposals have so far been refuted at the level of the Ministry of Finance and the Ministry of Economic Development. The government seems to understand that the increase tax rates, in addition to financial gain, carries very large risks. First, the collection may fall. Employees will be paid more often in envelopes, and firms will be even more active in withdrawing funds to preferential jurisdictions, offshore. The risk group also includes small businesses that cannot escape from the tax inspector in offshore.
Cost reduction
Actually, this process has already begun - a fundamental decision to freeze budget spending. In fact, this means their serious decline. Even if the Central Bank's plans for inflation are implemented, every year real spending will decrease by four percent.
This simple solution also has its downsides. First, spending cuts will reduce investment in the economy (albeit by no means always effective). Secondly, the standard of living of a part of the population, which depends in one way or another on government spending, will decrease. As a result, consumer demand will also suffer, which will harm the entire economy.
Again, with too much compression budget financing a wave of discontent is to be expected. On the other hand, ceteris paribus, the fall in government spending will provide some slowdown in inflation. This will positively affect the state of the financial markets in the country.
In general, it is not surprising that the government still prefers this option. But it is difficult to predict what will happen in three years, if the current cautious freezing measures do not give a result - the state may not take more drastic steps.
External debt
External debt financing is one of the traditional ways out of the budget crisis. There are more than enough examples in the world, starting with the largest economy in the world - the United States, where the debt limit is raised every few years.
Russia seems to have good opportunities for borrowing from outside. The last placement of bonds confirmed this - the demand for domestic Eurobonds doubled the supply. The volume of external public debt has been kept at a level below five percent of GDP for many years. Most even developing countries this figure is three to four times higher.
But everything is not so simple. First, no one has lifted the sanctions against Russia. Although formally they do not concern government obligations in foreign markets, investors wishing to buy Russian debts exert political pressure. The difficult foreign policy environment increases the risks in and of itself. Finally, investors have a prejudice about Russia's solvency. This factor also forces Russian bonds to be sold at some discount. So it is possible to speak seriously about large-scale borrowings abroad only if the sanctions are lifted.
In addition, there are serious doubts about the government's willingness to borrow more from abroad. The state is extremely reluctant to do this, fearing increased dependence on foreign investors. In addition, the increase in external debt burden endangers the ruble, making it more vulnerable to speculative attacks.
domestic debt
This option looks more attractive in our situation. Russian investors are more than willing to buy federal loan bonds. Some time ago, the government even thought about some kind of "mix" of domestic and foreign debt - the sale of ruble obligations foreign investors. Due to the devaluation, these plans had to be temporarily curtailed.
Over the past three years, Russian domestic debt has doubled in absolute terms and has grown significantly relative to GDP. There is no doubt that the government will continue to use this tool. The only question is to what extent. With all the convenience of the scheme with the expansion of internal borrowing, it has one, but a very serious disadvantage.
In conditions economic crisis money allocated for the purchase of public debt is washed out of active circulation. They do not go to investments or private consumption, which means that there is no need to rely too much on the expansion of the OFZ market.
Devaluation
Conscious depreciation of the ruble is a powerful tool economic policy. It helps you balance your budget. For example, Bank of America analysts believe that with an oil price of $25 per barrel, the dollar could jump to 210 rubles.
Photo: Viktor Korotaev / Kommersant
With higher oil prices, respectively, Russian currency will need to be weakened not so radically. Macroeconomic adviser to the CEO of the brokerage house Otkritie, Sergei Khestanov, believes that this is the most likely option for the state to act in the event of emptying the egg-pod.
However, the devaluation is a deep shock to the economy. Of course, some manufacturers benefit from it, but a sharp reduction in imports will hit the standard of living of the population and will inevitably accelerate inflation. In the long run, the stability of the ruble may also bring more benefits than short-term gains from balancing the budget and rising exporters' profits.
The economic growth
Finally, tax base, which means that the revenue side of the budget can be increased by raising the GDP. The advantage of this approach is that you don't have to sacrifice anything. Minus: it is the most difficult.
This requires real structural reforms. And unlike other methods, nothing can be solved here with a stroke of the pen on one document - multi-level painstaking work is needed. Whether the state is ready for this is still unclear. So far, forecasts for the coming years are quite pessimistic: Russia has entered a period of stagnation, and even after reaching the notorious bottom, growth will be anemic, within one or two percent.
Experts are highly skeptical. According to the head of the department of stock markets and financial engineering at RANEPA, former deputy chairman of the Central Bank Konstantin Korishchenko, growth through domestic sources, not exports, remains an unlikely scenario for now. First of all, due to the continued rigidity of the monetary and budget policy.
There is, however, an option that involves a significant increase in prices for oil and other raw materials. Then growth will resume by itself, which will make it possible not to resort to unpacking strategic cash reserves. However, looking at the current state of the world markets, the problems in China and the European Union, the slowdown in the US, one should not count on this.
Summing up, it can be said that the state is likely to choose a combination of several measures.
Konstantin Korishchenko is inclined to believe that the national debt will grow, and expenses will be reduced. “It has already been proposed to freeze spending, it is very dangerous to raise taxes both politically and economic reasons. Therefore, we will increase the national debt, since it is very small in our country by any standards,” the economist said. In addition, according to Korishchenko, non-oil and gas revenues are already growing, and if commodity prices restore at least part of the lost positions, then commodity revenues will increase significantly. In general, there will be enough money for the next five years.
Photo by Pavel Sarychev\NG-Online
According to the results of the first month of this year, the Reserve Fund increased by 1% due to exchange rate revaluation, reaching 973.5 billion rubles, the Ministry of Finance announced in early February. However, compared to January 2016, the volume of the fund decreased threefold - from $49.7 billion to $16.2 billion.
The fall in oil prices led to the rapid spending of the Reserve Fund: if in 2014 the average annual price of a barrel of Urals was $97.6, then in 2015 it was $51.2, and in 2016 it was $41.9 (IndexBoxRussia calculations ). The reason for this was the curtailment of the quantitative easing program by the US Federal Reserve in October 2014, followed by a tightening monetary policy: in December 2015, the Fed raised key rate(from 0.25 to 0.5%), and in December 2016 brought it to 0.75%. This, in turn, was a signal for investors to get out of commodities.
Although since the end of November oil quotes have been holding steadily above $50/bbl, they are unlikely to reach the abnormally high level of three years ago. The reason for this is the ease of recovery in US shale production, which does not require large additional investments to restart. Because of this, the number of drilling rigs operating in the United States in early February reached the highest level for the past year - 583 units (data from BakerHughes). The increase in oil production in the US will inevitably hold back the growth of quotations, regardless of the efforts of OPEC.
For Russia, this means the risk of exhaustion of the Reserve Fund already in the first half of this year. This means that the government will need to look for new sources for balancing federal budget. The first such source is likely to be the National Welfare Fund (NWF). Finance Minister Anton Siluanov announced back in June last year at the St. Petersburg International Economic Forum (SPIEF) that the Ministry of Finance would use NWF funds to cover the budget deficit. By the beginning of February, $72.5 billion had been accumulated in the NWF – almost the same amount (72.9 billion) was concentrated in the Reserve Fund in August 2015. This means that the NWF funds will be enough to cover the deficit for at least a year in advance without a serious reduction in budget spending.
Another source of covering the deficit could be borrowing on financial markets. However, under the sanctions, the government does not have much opportunity for this. Thus, before last year's placement by the Ministry of Finance of 10-year Eurobonds, the US Federal Reserve recommended investment banks do not buy Russian debt securities for fear that the proceeds will be given to those companies that are under sanctions. As a result, with a plan of $3 billion, the Treasury managed to allocate only $1.75 billion.
In this regard, sooner or later the government will have to make a radical revision of the budget policy. The key to preventing the acute phase of the crisis public finance may be a reduction in spending on state-owned companies, the armed forces and law enforcement agencies, the growth of which has made the main contribution to the increase in budget spending over the past 10 years. In 2005–2015, executed federal budget expenditures increased by 12.1 trillion rubles. – from 3.5 trillion to 15.6 trillion rubles. At the same time, spending on the economy increased by 2 trillion rubles. (from 249 billion to 2.32 trillion rubles), for defense - by 2.6 trillion rubles. (from 581 billion to 3.18 trillion rubles), and for security and law enforcement - by 1.5 trillion rubles. (from 450 billion to 1.97 trillion rubles).
Reducing these costs is the way out of the impending budget crisis, which threatens to become the most serious in the last 20 years. In terms of its scale, such a budget maneuver is comparable to the 67% reduction in arms purchases in 1992 and the forced refusal to borrow on the GKO market, which occurred after the default on August 17, 1998. In both cases, the radical revision of budgetary policy took place after the budgetary catastrophe. I would like such a revision to prevent it this time.
In December, the government spent all the resources of the Reserve Fund. More than 1 trillion rubles. was used to cover the budget deficit. In 2018, the deficit will be financed by the NWF
Photo: Maxim Bogodvid / RIA Novosti
In December, the Ministry of Finance fully spent the funds of the Reserve Fund to cover the federal budget deficit, according to a statement on the agency's website. The rest of the Reserve Fund - $ 7.62 billion, € 6.71 billion and £ 1.10 billion - were sold at the Central Bank for 1 trillion rubles. and credited to the unified account of the federal budget. As a result, “zero balances formed” on the accounts of the Reserve Fund, and on February 1, 2018, as it was planned last year, it will cease to exist, the Ministry of Finance said in a statement.
The reserve fund was reset to zero on December 22, when the last 54 billion rubles were spent to finance the budget deficit, the statistics of the treasury show. In January-November 2017, the Reserve Fund remained untouched. The budget deficit in 2017, according to the Ministry of Finance, amounted to about 1.6% of GDP (1.5 trillion rubles).
The Ministry of Finance has repeatedly warned about the depletion of the Reserve Fund by the end of 2017. As early as the beginning of 2016, while maintaining the pace of use of the fund's resources, it will be exhausted by 2017. After that, the budget deficit will have to be covered by the National Welfare Fund (NWF).
In 2017, the government managed to significantly reduce the spending of sovereign reserves - their net spending amounted to about 790 billion rubles. instead of the planned 1.7 trillion, Siluanov told reporters on 10 January. “This was done thanks to the work of the fiscal rule, which provides for the direction of oil and gas revenues in excess of the price of $40 per barrel into government reserves,” he said.
The Reserve Fund reached its maximum in ruble terms at the beginning of 2015 — 5,86 trillion rubles, and the maximum in relation to the size of the economy - at the beginning of 2009: 12,5% GDP. In 2016, the volume of the Reserve Fund decreased by 3.7 times - from 3.64 trillion rubles. to less than 1 trillion.
Now Russia has one sovereign fund left, but it will start replenishing again this year. In 2017, the Ministry of Finance has already received additional oil and gas revenues in the amount of approximately RUB 829 billion. — they were used to buy foreign currency, which will be transferred to the National Welfare Fund before October 1, 2018. As part of the permanent budget rule, the entire volume of oil and gas excess profits will be directed to the NWF.
The Reserve Fund and the NWF were created in 2008 as a result of the division of the Stabilization Fund. The first was a source of financing the budget deficit in the event sharp drop treasury income. The second one was created as part of the long-term mechanism for providing citizens with pensions, although in essence this function did not work. For example, in 2008-2009, part of the NWF was spent on anti-crisis assistance to banks (as a result, the fund now owns preferred shares of VTB, Gazprombank and Rosselkhozbank worth 279 billion rubles). It was decided to invest the other part of the funds in long-term self-sustaining infrastructure projects, such as the modernization of the Trans-Siberian Railway and the BAM or the construction of a nuclear power plant in Finland.
Liquid balances
As of January 1, 2018, the volume of the NWF in ruble terms is 3.75 trillion rubles. But, as follows from RBC's calculations based on Treasury data, only 59% of this volume (2.2 trillion rubles) are free resources that can be taken from accounts with the Central Bank at any time and used to finance the budget deficit or the deficit of the Pension Fund. fund.
The rest is invested in financial assets - deposits in Vnesheconombank (222.5 billion rubles plus $6.25 billion), preferred shares of VTB, Rosselkhozbank and Gazprombank (279 billion rubles), securities related to the implementation of infrastructure projects (113 billion rubles and $4.1 billion, which are placed in preferred shares of Russian Railways and the Atomic Energy Corporation, bonds of Yamal LNG, Zapsibneftekhim, etc.), deposits in VTB and Gazprombank for financing of infrastructure projects (164 billion rubles). Another $3 billion from the NWF was invested at the end of 2013 in the purchase of Ukraine's Eurobonds, for which it refused to pay after the change of power in the country.
The liquid funds of the National Welfare Fund, kept in foreign currency accounts with the Central Bank, can be placed in highly reliable bonds of foreign states, for example.
During 2018, the Ministry of Finance exchanged currency for the NWF by about 2 trillion rubles. additional oil and gas revenues at oil prices of $54-55 per barrel, Siluanov estimated (these amounts, respectively, will be transferred to the NWF as early as 2019). At $60, the volume of foreign currency purchases will amount to 2.8 trillion rubles.
In the new year, the funds of the National Welfare Fund will become the main source, along with borrowing, of covering the federal budget deficit — it is planned to use 586 billion rubles from the National Welfare Fund. But in the next two years, when the NWF will almost no longer be spent, but only replenished, borrowings will become the main source of covering the deficit. At the same time, the budget deficit will be set within 1% of GDP.
The Ministry of Finance of Russia spoke about the results of the placement of funds from the Reserve Fund and the National Wealth Fund for the period from January 1 to December 31, 2017. According to the ministry, in December 2017, the balances of the Reserve Fund in foreign currency in accounts ($7.62 billion, 6.71 billion euros and 1.10 billion pounds) were sold by the Ministry of Finance for 1 trillion rubles and used in full to cover the federal budget deficit.
According to the results of January-November last year, the deficit amounted to 532.4 billion rubles. But, by tradition, the largest amount of spending falls on December, so the final deficit will increase significantly. According to the forecast of the Minister of Finance, the budget deficit in 2017 amounted to about 1.5 trillion rubles, or 1.6% of GDP.
After the December operations, “zero balances were formed on the accounts of the Reserve Fund,” and from February 1, 2018, it will cease to exist, the ministry said in a statement. According to the decision adopted in June last year, the Reserve Fund joins the National Welfare Fund (NWF).
According to the Ministry of Finance, as of January 1, 2018, the volume of the National Wealth Fund amounted to 3.753 trillion rubles, which is equivalent to $65.15 billion. But of this amount, only $15.65 billion, 15.14 billion euros, were placed on separate accounts for the accounting of the funds of the National Welfare Fund with the Bank of Russia and 3.36 billion pounds. That is, live money in the National Welfare Fund is about 2 trillion rubles.
Earlier, Finance Minister Anton Siluanov predicted the depletion of the Reserve Fund. “This year we are fully using the resources of the Reserve Fund, as provided by the law on the budget,” he said.
The volume of the NWF as of January 1, 2018, according to the forecast of the Minister of Finance Anton Siluanov, was to be 3.7 trillion rubles, and its liquid part - 2.3 trillion rubles.
“The depletion of the Reserve Fund is a formality related to the fact that instead of two funds there will now be one - the NWF. Although, to be honest, now only one name will remain from the FNB.
Previously, it was really a fund where money was reserved for structural reforms, for some projects of the future that were supposed to change the social and economic state of the country through transformations, but now it is just a fund that receives money by exceeding the estimated price of oil and directs it to finance the deficit budget. That is, it can be called a money bag “for a rainy day”, as well as for some targeted programs that have nothing to do with reforms,” the Alor Broker analyst believes.
The former First Deputy Chairman of the Central Bank told Gazeta.Ru that there are both pluses and minuses in the depletion of the Reserve Fund. The advantage is that this "disciplines" the Ministry of Finance, since it will not have the opportunity to "scoop" money out of the egg, and the budget will be adopted fairly reliably. Minus - that in case of an offensive negative consequences there will be practically no "cushion".
With the current course oil, the depletion of the Reserve Fund does not threaten anything, a leading analyst at Amarkets believes.
But as soon as oil starts to fall to a critical level of $40 per barrel, the reserves may be exhausted and the devaluation of the ruble will be necessary.
But this year, thanks to high oil prices, the reserves should replenish. From January 1, 2018, a new budget rule. According to him, base price for oil is $40 per barrel of Russian Urals oil in 2017 prices (each year this value will be indexed by 2%). The excess amount will replenish the reserves. The Ministry of Finance will buy foreign currency on the market for the amount of ruble additional income.
Anton Siluanov said that the volume of currency purchases by the Ministry of Finance on the domestic market will amount to 2 trillion rubles in 2018. with an average annual oil price of $54-$55.
“At a price of $54-$55 per barrel, this will be about 2 trillion rubles. additional oil and gas revenues. It will even cover the spending of reserves that we have foreseen next year,” the minister said.
He also stressed that if the average annual price of oil is $60, the department will acquire foreign currency for 2.8 trillion rubles.
Head of Operations in Russian stock market IC Freedom Finance notes that the Ministry of Finance should soon publish a plan and calculations for replenishing reserves, a preliminary estimate is in the range of $38-50 billion in 2018, provided that oil will cost $55-60 per barrel of Russian Urals oil.
Last year, the Ministry of Finance bought foreign currency for 830 billion rubles. These funds have not yet been credited to the NWF.
Analysts foreign exchange market believe that the operations of the Ministry of Finance will put pressure on the ruble, and predict that it will decline against the US dollar and the euro.
“The regulator plans to completely buy back the free currency and thereby eliminate the surplus in the balance of payments, which will actually put an end to the further strengthening of the ruble,” says the analyst social network for eToro investors in Russia and the CIS.