The Ministry of Finance assessed the shock scenario of the energy transition

Why is NWF needed

The National Welfare Fund (NWF) is a budgetary reserve that is designed to finance government spending during periods of oil price downturns. The fund is formed from the proceeds of the so-called surplus income from the sale of energy resources. Tax revenues from the sale of oil above the cut-off price – for 2021 it is set at $ 43.3 per barrel and indexed annually – are sterilized by the NWF. In periods when the cost of energy resources falls below this mark, the funds of the fund compensate for the decrease in budget revenues; in fact, they go to cover expenses instead of taxes from the sale of oil. The total volume of the fund as of September 1 exceeded 14 trillion rubles, which is equivalent to 12.1% of the projected GDP for 2021, the Ministry of Finance reported. The liquidity part of the fund amounted to 8.5 trillion rubles, or 7.3% of GDP. According to the Budget Code, NWF funds in excess of 7% of GDP can be invested in “other financial assets,” below this level during periods when the price of oil is higher than the cut-off price, the volume of the fund cannot fall. As soon as the savings in the fund fall below 5%, restrictions on its use come into force – according to the Budget Code, no more than 1% of GDP is allowed to be spent per year.

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