Russia’s splurge: 90% of Reserve Fund to be spent in two years

The Russian Ministry of Finance has proposed to spend 90% of Russia’s Reserve Fund before the end of 2016.

In 2015, nearly 3.7 trillion rubles (just under $60 billion) of the Fund’s accumulated 5.3 trillion will be spent. The Ministry of Finance has put forth the proposal to spend another 1.15 trillion in 2016. According to their calculations, by the end of 2016 a total of 519.3 billion rubles ($8.3 billion) will be left in the Reserve Fund.

Finance Minister Anton Siluanov has announced that in 2017 Russia will replenish the Reserve Fund with 111 billion rubles ($1.8 billion).

These calculations have been made based on oil price predictions. The Ministry of Finance has estimated that in 2015 the year-average price of oil will be 50 dollars a barrel, in 2016 prices will go up to 65 dollars a barrel, and in 2017 we will see a 70 dollar average.

The budget deficit, according to the Ministry of Finance, will amount to 3.8% of GDP in 2015, which is 2.76 trillion rubles. In 2016 the deficit will fall to 1.2% of GDP, or 994 billion rubles, and in 2017 the budget will be balanced.

The Reserve Fund is formed by the federal budget oil and gas revenues. These revenues are also transferred to the Russian National Wealth Fund. In the beginning of February the National Wealth Fund stood at 5.1 trillion rubles.

Global oil prices have fallen over 50% since June, leading to significant revenue shortfalls in Russia, one of the world’s largest oil producers. Oil and gas account for 70% of export income in Russia.

When Russia entered the economic crisis, several companies applied for aid from the National Wealth Fund. Deputy Prime Minister Arkady Dvorkovich warned in 2014 that there are “definitely not enough funds to go around.”