Economists admitted the exhaustion of the Reserve Fund in 2017


Fourteen of the 32 economists and analysts surveyed believe that the Reserve Fund will end in 2017. At the beginning of 2016 it was RUB 3.6 trillion, by 1 June only — 2.6 trillion rubles. According to the budget, the Reserve Fund is the main source of funding Federal budget deficit, which may amount to 3 trillion RUB, says chief economist for Russia and CIS “Renaissance Capital” Oleg Kuzmin. In 2017, the budget is with a deficit, which, according to the Minister of Finance Anton Siluanov, “will be lower than this”.

“With the full implementation of the plan “big” privatization by the end of 2016 the Reserve Fund will be about 1.3-1.4 trillion rubles., which is theoretically possible to “stretch” to the end of 2017″, — said the Director of analytical Department IK “Region” Valery Vaisberg, adding that if the government does not fulfill the plans for the sale of assets, then the next year it will have only a few hundred billion rubles of the reserve.”

If the price of oil this year will remain at $40-45 per barrel by the beginning of 2017, the Reserve Fund may be about 1-1,1 trillion rubles, agree chief expert of Center for economic forecasting of Gazprombank Yegor Susin. In 2017, the Fund could be fully depleted if the price of oil will not return to levels above $50 per barrel, he adds.

Waste Reserve Fund — a headache for the Bank of Russia. It’s actually a money issue, which leads to growth of liquidity in the financial system, says Susin. The Ministry of Finance takes the currency in the Reserve Fund, but does not sell it on the open market and transfers to the Central Bank, which in return prints rubles. The expenditure of the Reserve Fund is to maintain excess liquidity in the banking system, the Bank of Russia needs to absorb, including, maintaining a high level of the key rate, says Weisberg.

Now the contingency Fund has resulted in a structural liquidity deficit in the banking system is replaced by a surplus. The dependence of credit institutions from instruments of refinancing of the Central Bank is reduced, and this automatically leads to the easing of monetary policy, says the analyst of UniCredit Bank Anna Bogdyukevich.

The longer the government will Finance the deficit at the expense of the Reserve Fund, the slower will be mitigated by monetary policy of the regulator, Weisberg concludes.

Fifteen of the 32 experts believe that the Board of Directors of the Bank of Russia on Friday, 10 June, will leave the key rate at 11% per annum, 17 — which will reduce rates by 50 b.p. to 10.5%.

Nine experts surveyed , believe that the Reserve Fund is empty. “It is unlikely that the government will allow the complete exhaustion of the Reserve Fund, as there are alternative solutions to the problem of the budget deficit: debt capacity, cost savings, etc.,” says chief analyst “IK Veles Capital” Yuri Kravchenko. The government will finish work on a new fiscal policy earlier than is exhausted, the Reserve Fund, agrees chief economist at Credit Suisse in Russia by Alexey Pogorelov. Economist for Eastern Europe, BNP Paribas Michal Dybula believes that the authorities will leave the contingency Fund of $25-30 billion to “make it a space for maneuvers of the budget, if oil prices will go down again”.

In addition to the Reserve Fund in stock still have the national welfare Fund, from 4.8 trillion. However, economists surveyed agree that instead of spending “stash” it would be better to increase the amount of borrowing.

Today the ratio of debt to GDP (excluding government guarantees) is only 10.7 percent, said the Deputy head of the analytical Department of the Directorate of operations on financial markets Bank “Saint Petersburg” Olga Lapshina. According to her calculations, even if during the year the Finance Ministry will place OFZ on 100 billion roubles each week-a relative measure of debt to the end of the year will amount to only 14.1 per cent of GDP.” “Due to such “supermissile” it is possible to Finance the Federal budget deficit 3.5 trillion If the Ministry of Finance fully accommodate the planned external loan of $3 billion, the ratio of debt to GDP will increase by 0.2 percentage points to 14.3%,” says Lapshin.