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MOSCOW – Russia’s State Wealth Fund shrank to US$148.4 billion (SGD195 billion) as of Jan. 1 as the government withdrew cash to fund its budget deficit, data on Wednesday showed decreased by US$38.1 billion.

The ministry said it spent 2.41 trillion rubles (S$46 billion) from the NWF, the Rainy Day Fund, which accumulates oil revenues, to cover the December deficit.

The NWF, originally intended to support the pension system, is the main source of funding for the budget deficit, along with heavy government borrowing in domestic debt auctions. Russia invaded Ukraine last year And it has been hit by an unprecedented wave of Western sanctions.

The government also used it last year to help struggling state-owned companies such as Russian Railways and airline Aeroflot.

Analysts say Russia’s attempt to sell its foreign exchange reserves to fill its budget deficit could lead to a vicious cycle that would boost the ruble and further reduce vital export earnings from the Kremlin’s oil and gas. I’m here.

The size of the NWF as of January 1 was equivalent to 7.8% of the country’s gross domestic product, according to the Ministry of Finance. However, liquid assets were only $87.2 billion, or 4.6% of GDP.

As of February 1st last year, three weeks before the invasion, total funds had reached US$174.9 billion, or 10.2% of the projected GDP.

Finance Minister Anton Siluanov said last week that Russia had a budget deficit of 2.3% of GDP last year and had targeted a surplus of 1% before the start of the war.

According to the Budget Law, the Ministry of Finance can spend another 4.2 trillion rubles (currently worth about $61 billion) over the next two years to cover the deficit.

As a result, according to the ministry, NWF liquidity in central bank accounts could fall to 2.3 trillion rubles, or 1.4% of GDP, by the end of 2024, the lowest level in 20 years. When it comes to ratios, the Chamber of Accounts says.

According to data from the Ministry of Finance, in 2022 tax revenues from imports subject to customs duties and VAT fell by 20%, or nearly 1 trillion rubles, further demonstrating pressure on the budget.

Imports plunged last year as a result of Western sanctions and the withdrawal of Western companies from Russia, but started to recover later this year.Reuters Russia’s Rainy Day Fund shrinks by US$38 billion as government closes deficit

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