(Reuters) – Russia’s National Wealth Fund (NWF), a rainy-day cushion containing oil revenues, will be the main source of financing for a budget deficit seen at 1.6 trillion roubles ($21.6 billion) or more in 2022, the finance minister said on Wednesday.
Russia faces soaring inflation and capital flight while grappling with a possible debt default after the West imposed harsh sanctions to punish President Vladimir Putin for sending tens of thousands of troops into Ukraine on Feb. 24.
“The National Wealth Fund will be the main source of funding for expenditures 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 will be higher than planned, we will spend less from the NWF. In the opposite case, then we will spend more from it.”
Russia will also channel 50 billion roubles from the NWF to top up the capital of Gazprombank 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 has halted gas flows to Bulgaria and Poland after they rejected its demand for payment in roubles.
Siluanov also said his ministry was eager to adjust Russia’s fiscal rule, designed to shield Russia from swings in oil prices.
Under the current rule, Russia cannot spend more than its non-oil and gas revenues together with proceeds from selling oil above a particular oil level. Moscow already relaxed the rule to boost state spending and borrowing to battle the COVID-19 pandemic in 2020-2021.
“In the current conditions, the old rules cannot be implemented,” Siluanov said. “The finance ministry has made proposals for new budget rules that the government is considering.”
Russia will not borrow on the domestic market this year but could gradually return to borrowing in 2023 if inflation and OFZ government bond prices stabilised, Siluanov added.
($1 = 74.1670 roubles)
(Reporting by Reuters; Editing by Alex Richardson and Frank Jack Daniel)