The Accounts Chamber of Russia announced on Thursday that the country’s National Wealth Fund (NWF) will not receive additional revenue from oil and gas exports this year. The chamber’s report on the management of the NWF in 2022 and the first half of 2023 states that the government has had to increase spending to support the economy due to “geopolitical and sanctions pressure.” As a result, fiscal regulations requiring oil and gas revenue above a certain threshold to be deposited into the sovereign fund were suspended last year.
According to the chamber, the NWF will not be replenished with additional oil and gas revenue, as stated in a release published on its website. The fund will only be replenished when the base volume of oil and gas revenue exceeds 8 trillion rubles ($85.5 billion), as per the regulations adopted for 2023-2025.
The chamber’s figures reveal that in 2021, the NWF received an additional 2.7 trillion rubles ($28.8 billion) of oil and gas income. As of July 1 of this year, the fund held 12.7 trillion rubles ($135.7 billion), which represents a 6.73% decrease compared to the beginning of 2022.
The purpose of the National Wealth Fund is to support the national pension system and help cover budget deficits. In addition to oil and gas profits, it is also replenished by income from the management of its assets.
The decision not to replenish the NWF with additional oil and gas revenue reflects the challenges Russia faces due to geopolitical tensions and sanctions from other countries. Increased government spending to support the economy has put additional pressure on the country’s finances, leading to the suspension of fiscal regulations regarding the sovereign fund.
The NWF plays a vital role in Russia’s financial stability, as it supports the national pension system and helps cover budget deficits. However, without the additional revenue from oil and gas exports, the fund’s holdings have decreased. This decrease in funds could impact the government’s ability to meet its financial obligations.
It remains to be seen how the suspension of the fiscal regulations will affect Russia’s economy in the long term. The country will need to find alternative sources of funding to support its financial stability and protect its economy from external pressures. The management of the NWF’s assets will become even more crucial in ensuring the fund’s sustainability and ability to support the national pension system.
In conclusion, the decision not to replenish Russia’s National Wealth Fund with additional revenue from oil and gas exports this year reflects the challenges the country faces due to geopolitical and sanctions pressure. The fund, which supports the national pension system and helps cover budget deficits, will only be replenished when the base volume of oil and gas revenue exceeds a certain threshold. The decrease in the fund’s holdings highlights the need for alternative sources of funding and effective management of its assets to ensure long-term financial stability.