Fin ministry yet to decide on investment from bloated wealth fund

ST. PETERSBURG, Jun 7 (PRIME) -- The finance Ministry has not yet chosen projects to invest money from the National Wealth Fund after the fund exceeds 7% of gross domestic product (GDP), Deputy Finance Minister Vladimir Kolychev told PRIME late on Thursday.

“We have this ability (to expand instruments of investment of the National Wealth Fund’s money), but we have not set any guidelines for a specific portfolio of assets,” he said.

The fund will exceed 7% of GDP only in 2020, as the government currently transfers additional oil and gas income of the budget to a special account with the central bank at the end of the year, he said.

The ministry is considering different investment instruments, including sovereign bonds of states where the fund already invests its money, albeit with longer maturity. “In the end, the National Wealth Fund is the money of the taxpayers, and we need it to ensure fair intergenerational distribution of oil revenue. The higher the yield is at acceptable risks, the more we will comply with the function,” he said.

The ministry should have an integrated approach to discussions of investment targets.

“Our macroeconomic policy that we have been creating for the last three years, including the budget rule, targeting, the floating rate has results, it is efficient because excessive oil prices do not influence the domestic economy,” Kolychev said.

“Investment in Russia will mean that the oil prices influence our economy and policy efficiency will dwindle. This is why foreign assets are preferable.”

The ministry may also spend the excessive money of the National Wealth Fund on intergovernmental loans if it wants to support the national economy, he said.

He also said that the Russian budget will need reserves of about 10–12% of GDP in order to fulfill all liabilities under the toughest stress scenarios.

“We’ve held stress tests to see the shortfalls in the energy incomes under tough stress scenarios of oil prices. Our estimates showed that even if the oil price falls to U.S. $30–25 and the fall continues for a long time of up to three or even five years, the shortfall revenue will amount to 10–12% of GDP in this case,” he said.

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