{"id":647,"date":"2019-08-09T03:59:53","date_gmt":"2019-08-09T01:59:53","guid":{"rendered":"http:\/\/www.noyardstick.com\/?p=647"},"modified":"2019-08-09T04:02:39","modified_gmt":"2019-08-09T02:02:39","slug":"ny-dispatches-russias-growing-welfare-fund","status":"publish","type":"post","link":"https:\/\/www.noyardstick.com\/?p=647","title":{"rendered":"NY Dispatches: Russia’s growing Welfare Fund"},"content":{"rendered":"

Russia’s frugal fiscal planning and the recovery of oil prices may land some extra money for the government to spend in the next two years, before the 2021 legislative election. Who gets this money, when and how will say a lot about the changing balance of power within the political elite as well as about Vladimir Putin’s contingency plans.\u00a0<\/strong><\/p>\n

<\/p>\n

Russia\u2019s National Welfare Fund, the country’s sovereign wealth fund more than doubled<\/a> in July to about 124 billion USD (7.8 trillion rubles). The increase was the result of a financial maneuver of the Ministry of Finance, which added money to the fund\u2019s accounts from oil revenues. Most of the NWF is tied down in long-term investments, however, the new money increased the liquid part of the fund, which has now reached 5.7 percent of Russia\u2019s GDP. This is important because the government is free to spend any surplus above a 7-percent threshold. The Ministry estimates that the fund will surpass this threshold later this year \u2013 both the IMF and the government estimate the economy to grow faster on the back of increased infrastructure spending and the reform of the pension system (although estimates differ) \u2013 which will make 1.8 trillion rubles available in 2020 and 4.2 trillion in 2021.<\/p>\n

Let\u2019s put this astronomical number into perspective. 1.8 trillion is significantly bigger than the net 2018 profit<\/a> of Rosneft, Russia\u2019s state-owned oil company (549 billion). It is just shy of Russia\u2019s planned budget surplus<\/a> in 2019 (1.9 trillion) \u2013 the existence of which is one of the main reasons why the NWF was able to grow \u2013 and a little less than the total public debt of Russia\u2019s regions was in August 2018 (2.16 trillion). It is a little over half of what the federal budget spent on compensating<\/a> the pension system\u2019s deficit in 2018 (3.35 trillion). It falls significantly short of the total cost of Vladimir Putin\u2019s twelve \u201cnational projects<\/a>\u201d (estimated at 25.7 trillion across six years). However, the liquid part of the NWF that the Russian government plans to be able to spend in 2020-21 surpasses the 5.6 trillion rubles that it is planning to spend on these projects in 2019-21.<\/p>\n

In his seminal 1936 work Harold Lasswell, a political scientist defined politics as \u201cwho gets what, when, how\u201d. Indeed who gets the liquid part of the NWF and how will tell us a lot not only about the changing balance of power within the political elite but also about Vladimir Putin\u2019s priorities before key legislative elections in 2021 that will determine the composition of the legislature sitting in 2024 when Putin\u2019s fourth and likely final presidential term ends.<\/p>\n

Candidates to get at least part of the money abound, from the cash-starved, sanction-squeezed energy industry that needs funds to finance extractive projects, to indebted and increasingly restive regions, dilapidated road networks and a puttering health care infrastructure. There definitely is an incentive to use the money to dampen public resentment over growing poverty, falling real wages and the government\u2019s unpopular pension reform.<\/p>\n

Even if the Finance Ministry\u2019s calculations are right, the resulting money can realistically be spent on one or two bigger goals in order for it to make a tangible impact. In the past years, the government has become increasingly reactive and presently does not seem to be ready or able<\/a> to offer voters anything else than symbolic concessions when protests only concern local matters and the regime\u2019s secondary currency (money) and harsher repression when they concern its primary currency (the monopoly of power). Together with an increasingly nervous political elite seeking short-term cash-outs and opportunities to hedge against losses in the post-Putin era, it is hard to see the Kremlin coming up with a bulletproof plan to use the surplus of the NWF. It will certainly try to come up with one \u2013 but it is more likely to be a mirror of the president\u2019s concerns and contingency plans than anything else.<\/p>\n","protected":false},"excerpt":{"rendered":"

Russia’s frugal fiscal planning and the recovery of oil prices may land some extra money for the government to spend in the next two years, before the 2021 legislative election. Who gets this money, when and how will say a … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[159,6],"tags":[72,43,41,50,66,44,19,120,94,171],"class_list":["post-647","post","type-post","status-publish","format-standard","hentry","category-dispatches","category-policies","tag-central_bank","tag-duma_election","tag-economy","tag-government","tag-pension_reform","tag-protests","tag-putin","tag-regions","tag-sanctions","tag-welfare_fund"],"yoast_head":"\nNY Dispatches: Russia's growing Welfare Fund - No Yardstick<\/title>\n<meta name=\"description\" content=\"Russia's frugal fiscal planning and the recovery of oil prices may land some extra money for the government to spend in the next two years, before the\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.noyardstick.com\/?p=647\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"NY Dispatches: Russia's growing Welfare Fund\" \/>\n<meta property=\"og:description\" content=\"Russia's frugal fiscal planning and the recovery of oil prices may land some extra money for the government to spend in the next two years, before the 2021 legislative election. 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