Photo by Pavel Sarychev\NG-Online

According to the results of the first month of this year, the Reserve Fund increased by 1% due to exchange rate revaluation, reaching 973.5 billion rubles, the Ministry of Finance announced in early February. However, compared to January 2016, the volume of the fund decreased threefold - from $49.7 billion to $16.2 billion.

The fall in oil prices led to the rapid spending of the Reserve Fund: if in 2014 the average annual price of a barrel of Urals was $97.6, then in 2015 it was $51.2, and in 2016 it was $41.9 (IndexBoxRussia calculations ). The reason for this was the curtailment of the quantitative easing program by the US Federal Reserve in October 2014, followed by a tightening of monetary policy: in December 2015, the Fed raised the key rate for the first time in nine years (from 0.25 to 0.5%), and in December 2016 brought it to 0.75%. This, in turn, was a signal for investors to get out of commodities.

Although since the end of November oil quotes have been holding steadily above $50/bbl, they are unlikely to reach the abnormally high level of three years ago. The reason for this is the ease of recovery in US shale production, which does not require large additional investments to restart. Because of this, the number of drilling rigs operating in the United States in early February reached the highest level in the past year - 583 units (data from BakerHughes). The increase in oil production in the US will inevitably hold back the growth of quotations, regardless of the efforts of OPEC.

For Russia, this means the risk of exhaustion of the Reserve Fund already in the first half of this year. This means that the government will need to look for new sources to balance the federal budget. The first such source is likely to be the National Welfare Fund (NWF). Finance Minister Anton Siluanov announced back in June last year at the St. Petersburg International Economic Forum (SPIEF) that the Ministry of Finance would use NWF funds to cover the budget deficit. By the beginning of February, $72.5 billion had been accumulated in the NWF – almost the same amount ($72.9 billion) was concentrated in the Reserve Fund in August 2015. This means that the NWF funds will be enough to cover the deficit for at least a year in advance without a serious reduction in budget spending.

Borrowing in the financial markets could be another source of covering the deficit. However, under the sanctions, the government does not have much opportunity for this. Thus, before last year's placement of 10-year Eurobonds by the Treasury, the US Federal Reserve recommended investment banks not to purchase Russian debt securities for fear that the proceeds would be provided to those companies that are under sanctions. As a result, with a plan of $3 billion, the Treasury managed to allocate only $1.75 billion.

In this regard, sooner or later the government will have to make a radical revision of the budget policy. The key to preventing an acute phase of the crisis in public finances may be to reduce spending on state-owned companies, the armed forces and law enforcement agencies, the growth of which has made a major contribution to the increase in budget spending over the past 10 years. In 2005–2015, executed federal budget expenditures increased by 12.1 trillion rubles. – from 3.5 trillion to 15.6 trillion rubles. At the same time, spending on the economy increased by 2 trillion rubles. (from 249 billion to 2.32 trillion rubles), for defense - by 2.6 trillion rubles. (from 581 billion to 3.18 trillion rubles), and for security and law enforcement - by 1.5 trillion rubles. (from 450 billion to 1.97 trillion rubles).

Reducing these costs is the way out of the impending budget crisis, which threatens to become the most serious in the last 20 years. In terms of its scale, such a budget maneuver is comparable to the 67% reduction in arms purchases in 1992 and the forced refusal to borrow on the GKO market, which occurred after the default on August 17, 1998. In both cases, the radical revision of budgetary policy took place after the budgetary catastrophe. I would like such a revision to prevent it this time.

The Ministry of Finance of Russia spoke about the results of the placement of funds from the Reserve Fund and the National Welfare Fund for the period from January 1 to December 31, 2017. According to the ministry, in December 2017, the balances of the Reserve Fund in foreign currency on accounts of ($ 7.62 billion, 6. 71 billion euros and 1.10 billion pounds sterling) were sold by the Ministry of Finance for 1 trillion rubles and used in full to cover the federal budget deficit.

According to the results of January-November last year, the deficit amounted to 532.4 billion rubles. But, by tradition, the largest amount of spending falls on December, so the final deficit will increase significantly. According to the forecast of the Minister of Finance, the budget deficit in 2017 amounted to about 1.5 trillion rubles, or 1.6% of GDP.

After the December operations, “zero balances were formed on the accounts of the Reserve Fund,” and from February 1, 2018, it will cease to exist, the ministry said in a statement. According to the decision adopted in June last year, the Reserve Fund joins the National Welfare Fund (NWF).

According to the Ministry of Finance, as of January 1, 2018, the volume of the National Wealth Fund amounted to 3.753 trillion rubles, which is equivalent to $65.15 billion. But of this amount, only $15.65 billion, 15.14 billion euros, were placed on separate accounts for the accounting of the funds of the National Welfare Fund with the Bank of Russia and 3.36 billion pounds. That is, live money in the National Welfare Fund is about 2 trillion rubles.

Earlier, Finance Minister Anton Siluanov predicted the depletion of the Reserve Fund. “This year we are fully using the resources of the Reserve Fund, as provided by the law on the budget,” he said.

The volume of the NWF as of January 1, 2018, according to the forecast of the Minister of Finance Anton Siluanov, was to be 3.7 trillion rubles, and its liquid part - 2.3 trillion rubles.

“The depletion of the Reserve Fund is a formality related to the fact that instead of two funds there will now be one - the NWF. Although, to be honest, now only one name will remain from the FNB.

Previously, it was really a fund where money was reserved for structural reforms, for some projects of the future that were supposed to change the social and economic state of the country through transformations, but now it is just a fund that receives money by exceeding the estimated price of oil and directs it to finance the deficit budget. That is, it can be called a money bag “for a rainy day”, as well as for some targeted programs that have nothing to do with reforms,” the Alor Broker analyst believes.

The former First Deputy Chairman of the Central Bank told Gazeta.Ru that there are both pluses and minuses in the depletion of the Reserve Fund. The advantage is that this "disciplines" the Ministry of Finance, since it will not have the opportunity to "scoop" money out of the egg, and the budget will be adopted fairly reliably. The downside is that in the event of negative consequences, there will be practically no “cushion”.

With the current course oil, the depletion of the Reserve Fund does not threaten anything, a leading analyst at Amarkets believes.

But as soon as oil starts to fall to a critical level of $40 per barrel, the reserves may be exhausted and the devaluation of the ruble will be necessary.

But this year, thanks to high oil prices, the reserves should replenish. From January 1, 2018, a new budget rule comes into force in Russia. According to him, the base oil price is $40 per barrel of Russian Urals oil in 2017 prices (each year this value will be indexed by 2%). The excess amount will replenish the reserves. The Ministry of Finance will buy foreign currency on the market for the amount of ruble additional income.

Anton Siluanov said that the volume of currency purchases by the Ministry of Finance on the domestic market will amount to 2 trillion rubles in 2018. with an average annual oil price of $54-$55.

“At a price of $54-$55 per barrel, this will be about 2 trillion rubles. additional oil and gas revenues. It will even cover the spending of reserves that we have foreseen next year,” the minister said.

He also stressed that if the average annual price of oil is $60, the department will acquire foreign currency for 2.8 trillion rubles.

The head of operations in the Russian stock market of Freedom Finance IC, notes that the Ministry of Finance should soon publish a plan and calculations for replenishing reserves, a preliminary estimate is in the range of $38-50 billion in 2018, provided that oil will cost $55-60 per barrel of Russian oil Urals.

Last year, the Ministry of Finance bought foreign currency for 830 billion rubles. These funds have not yet been credited to the NWF.

Currency market analysts believe that the operations of the Ministry of Finance will put pressure on the ruble, and predict its decline against the US dollar and the euro.

“The regulator plans to completely buy back the free currency and thereby eliminate the surplus in the balance of payments, which will actually put an end to the further strengthening of the ruble,” says an analyst at the social network for investors eToro in Russia and the CIS.

The depletion of the Reserve Fund in 2017 will not come as a surprise, and the financing of the budget deficit may continue from the National Welfare Fund (NWF), experts say. The recently published data of the Ministry of Finance show that in 2016 the funds of the Reserve Fund decreased by almost four times and amounted to 972.1 billion rubles. The National Welfare Fund during this time "lost weight" by 17% to 4.36 trillion rubles.

The fact that the Reserve Fund in the coming year is threatened with exhaustion was recognized in the Ministry of Finance last year. Deputy Finance Minister Alexei Lavrov noted in September last year that the Reserve Fund will become scarce by the end of 2017, but after that, the financing of the state budget deficit will begin from the NWF. It is he who in the financial department is considered a "pension airbag."

He also does not believe that the NWF will necessarily be spent. "This fund will be used only if necessary. There are other sources of financing the budget deficit," he said, pointing out that oil prices are currently around $50-55 per barrel. As you know, this year's budget was drawn up on the basis that oil would cost $40 per barrel.

I must say that in previous years the average oil price was above $40. According to the same Ministry of Finance, in 2016 the average annual price of Russian Urals oil was 41.9%, and in 2015 - 51.23%.

Mikhail Matovnikov, chief analyst at Sberbank, also said that it is not at all necessary for Russia to completely spend the funds of the NWF. According to him, one should look for sources of financing the budget deficit in borrowings.

“Russia is now in a rather comfortable situation when it can choose a source of resources,” Matovnikov suggested. “Actually, the Reserve Fund has not yet been completely spent, and there are other sources of financing. Investors understand that the Ministry of Finance has a choice, this will allow borrowing on good conditions."

However, not all experts believe that everything will be comfortable in the financial sector in 2017. In particular, Ruslan Grinberg, head of the Institute of Economics of the Russian Academy of Sciences, believes that in 2017 oil prices may fall sharply. The fact that the low exchange rate of the ruble and the fall in quotations will help force the Russian government to "move" was told to Lente.ru by former Economy Minister Sergei Nechaev.

However, the current situation in the oil market leaves the Russian fund hope for the future. Last December, Finance Minister Anton Siluanov argued that part of the additional revenue from rising oil prices in 2018-2019. will be used to cover budget expenditures to maintain the Reserve Fund and the National Welfare Fund.

S. Sorokina- I greet you. Good evening. I am Svetlana Sorokina. Today without Yuri Kobaladze. who is resting. If he hears, then hello to him. I present my guests: Vladimir Nazarov, Director of the Research Financial Institute under the Ministry of Finance of Russia. We saw each other recently, they frightened us about future changes in pensions. Let's talk today. And Nikolai Petrov, political scientist, professor at the Department of Political Science at the Higher School of Economics. They named it without any fuss: what threatens the exhaustion of the Reserve Fund. The fact is that just yesterday, I think, a study by the HSE Development Center was published, they said that the crisis of the Russian economy in the first half of the year only intensified based on the results of everything that they summarized. And that the Reserve Fund may be exhausted before the end of this year. The reserve fund is such a state stash, which helps in case of a strong budget deficit. It is said that by the end of this year, not in 2017, as the Ministry of Finance predicted, this fund will end. Why is it bad, how bad, what are the options for getting out of the situation - let's talk about it. Firstly, I wanted to ask Vladimir Nazarov who is under the Ministry of Finance, Volodya, please tell me, have you read the study.

V. Nazarov- Yes.

S. Sorokina- Do you agree with everything or maybe there are some disagreements.

V. Nazarov- In principle, one can agree with everything, only one can find fault with the details. We have constant discussions about whether the bottom has been found.

S. Sorokina- I think it's already happened a few times.

V. Nazarov- The Ministry of Economic Development is looking for him. It is clear that the economy is still in recession. It is clear that, most likely, we did not find the bottom. But on the other hand, there is no drama that yes, the fall is slowing down. That is, we are all falling, but more slowly. And in principle, this year the rate of decline in our economy will be less than 1%. It's annoying, but it's not a disaster. There are more unpleasant things, for example, construction has decreased by 10%. This is one of the indirect indicators, which is completely unimportant with investments in the country. Really bad. And this tells us that low rates of economic growth are also laid in the future. But there is no drama here yet. On the budget, I would not agree with them, after all, we, as the Ministry of Finance, still insist that the Reserve Fund will be exhausted next year. Not in this.

S. Sorokina- That is, not in December of this, but in January of the next.

V. Nazarov- Maybe a quarter or half a year even. In my opinion, by the end of this year, about 600 billion will remain there, unless there is a strong drop in oil prices and other emergencies. If everything continues as it continues, it seems to me that colleagues simply do not take into account that there will be a number of additional incomes both from privatization and from the profits of the Central Bank. He made a very good profit on lending to banks and from devaluation. And part of this profit will be withdrawn to the budget. But this, unfortunately, is a one-time income. They will help us a lot this year, and the deficit this year will be very decent. Less than 3% of GDP. Although it should have been around 4. And this year the numbers will be very decent. The trouble is that these are one-time incomes and what will happen next year, and even more so in 2018, is less clear.

S. Sorokina Until I stop you. And I turn to Nikolai Vladimirovich. What is your impression of this study and its results of our colleagues from the HSE?

N. Petrov- It seems to me that no one, including the authors of the study, is particularly optimistic today. Vladimir showed us a completely optimistic position, which we have the pleasure of hearing from the government from time to time. I would remind you that if privatization, Bashneft is now being privatized in favor of Rosneft, then it is strange to think about any special income ...

N. Petrov: No one is optimistic today

V. Nazarov- We hope that this will not be in favor of Rosneft.

S. Sorokina- I have a feeling that Rosneft always absorbs and nothing is left for everyone else. Or am I not right?

N. Petrov For now, at least...

S. Sorokina- Based on previous experience.

N. Petrov- ... there was no reason to underestimate the appetites and capabilities of Rosneft. Inflation. Rather, if the money is not enough, then we will see their next portion. As for the indicators, yes, you can reassure yourself that there is only a 1% drop. But it is noteworthy that not only our investments are in a very bad state, which means that there cannot be growth for a long time yet, there is nothing to grow from. But consumer demand is also falling much faster than the economy is falling. That is, the money that people receive, they are afraid to spend today, and thus we do not yet see either an external mechanism, an engine for the development of the economy in the form of investments, or an internal one in the form of growing consumer demand. Therefore, we are not just talking today about the fact that yes, it is close to stagnation. Small fall, slide down. But there are absolutely no prospects that would allow us to share the optimism of some leaders of the government's economic bloc. The fact that the bottom has already been passed and growth is expected in the near future.

S. Sorokina- Nikolai Vladimirovich, I understand the position of the members of the government, well, they can’t say that everything, everything is bad and it will get even worse. It's just unimaginable. And on the other hand, in what expressions should they characterize the situation, it seems, not to lie, and not to talk about this bottom for the tenth time and not to frighten the population.

N. Petrov- In any case, it is not worth scaring the population, because this is fraught with negative consequences, even if there are no serious objective grounds for this. This is clear. The question is to what extent such psychotherapeutic functions of the leaders of the economic bloc dominate or do not dominate the functions of such a normal expert analysis, when actions are taken and we see that the government, in general, tends to be more rational, based on the real situation. Clearly something else. That this is not an economic problem purely. That political decisions, political steps are needed here. And without it, what can the government do. And it can't do anything.

S. Sorokina Do you agree, Vladimir?

V. Nazarov- While we really observe a certain pause, let's say, in making any decisions. Before the elections, really, no significant things are discussed. Order given...

S. Sorokina- Duma or presidential.

V. Nazarov- I hope that the Duma. Although anything can happen. And maybe the situation will be suspended further. But the command was given to two centers, respectively, the center of Kudrin and the Stolypin club to work out strategies. So far they have gone into the fields to work out strategies, and the government is busy with current affairs.

S. Sorokina- By the way, these two clubs still have different positions. And how will the golden mean be found here.

V. Nazarov- I hope that they will not look for a middle ground, because looking for a middle ground between them means harnessing a swan and a pike, respectively, and leading ...

S. Sorokina- That is, one option will be selected.

V. Nazarov“It seems to me that it is rational to choose one option.

S. Sorokina- Which one are you leaning towards? To Kudrinsky?

V. Nazarov- Naturally, what is just a proposal of the Stolypin Club, there are a number of correct things about the investment climate, about entrepreneurship, slogans. Unfortunately. about judicial reform. But there are no specifics. And there are specifics only in those places that cannot but frighten. The specifics are that the only problem is that there is no money, they need to be printed. But colleagues do not understand that money is not taken out of thin air. If you print money, it means you are taking it away from someone. You either take them away from the population in the form of higher inflation, or, accordingly, from enterprises in the form of more expensive loans. And then the question arises, to whom you give this money further. And through what channels. Excuse us, 60% of banks are state-owned banks. The lion's share of those who are credited in these banks are state-owned companies. That is, you took money from the population and, most likely, from the most efficient enterprises, and transferred it through not the most effective tools to not the most efficient enterprises. The question arises how much this will stimulate economic growth. I am very skeptical about this. That in principle I do not expect anything good from this target mission, and our Russian experience shows that this did not lead to anything. In the 90s, many times they tried to get into this enterprise directly from the Central Bank, to throw money like that, but the economy does not respond. They think maybe we throw a little, let's do more. Throw more, but still nothing happens.

S. Sorokina- But such a seductive story, take it to print. It's like bringing everyone back to life. The cycle has begun. This is a serious topic - a reduction in demand, for example, domestic. People are tightened up, still maybe not in such colossal numbers. But even in life you feel how tight people are in their, for example, some daily expenses.

V. Nazarov“People are huddled with expectations. That is, the expectations are really negative.

S. Sorokina- Not only. Already today's life dictates that it is necessary to draw in.

V. Nazarov- If people could see that the economy is growing, that every day my salary is a little, but growing, yes, it is low, but it is growing. Then people would consume, take loans, which they did until recently. That is, they would be more optimistic. When they see that all this is slowly shrinking, today I have a salary, and tomorrow what it will be, no one knows. What will be inflation is also unknown. That's why everyone is so tight. These are purely expectations. By the way, the budget is also one of the factors, that is, if we have a very large budget deficit, investors may not trust us. They will think about how these guys will get out of this deficit. What will they do. Print money, raise taxes, what action. And to run to invest in a country with such a deficit, well, not everyone will dare.

S. Sorokina- Not happy. What do you think, Nikolai Vladimirovich, expectations or reality that makes people reduce their demand, their spending, purely even psychologically, how serious is this for society?

N. Petrov- I think it's very serious. And we see from sociological polls that people tend to evaluate the current situation more optimistically than the prospects for the foreseeable future. And this instability, the feeling that tomorrow will be worse than today, it has the character of such a vicious circle. That is, it is very difficult to break it. If people proceed from these expectations, then their behavior is more likely to provoke the dynamics that they imagine. And in this regard, I would like to mention another study, we are doing it with colleagues for the Committee of Civic Initiatives. And we analyze the state of affairs in the regions. And we compare the socio-economic well-being, the political situation and the protests, if they take place. And what we see, once every six months, we conduct these sections. What we see, it rather leads to such pessimistic thoughts. Because the socio-economic situation is deteriorating in a significant number of regions. And if you look at the map, it's such a solid red spot. That is, according to the criteria by which we assessed a year ago, today it is significantly worse in most cases. And in this situation, it would seem, when a lot depends on the political design, that is, on the ability of the regional political system to extinguish those negative things that objectively arise in the economy as a result of the crisis. Unfortunately, the political design is deteriorating too. A little, but nonetheless. Elections of mayors are being canceled, the rights of the opposition are being squeezed, and representative power is playing an even smaller role. And the ability of the political system at the regional level to be flexible and respond to the deterioration of the socio-economic situation and channel the tension that naturally arises in society is decreasing rather than increasing. That is, the gap between the objective situation in the economy, people's perception of it on the one hand, and the ability of the political system to extinguish some tensions that arise because of this, this gap is growing.

N. Petrov: Political design is also deteriorating

S. Sorokina“But it’s actually really scary. I understand that so far we have some such manifestations of resistance if an enterprise is closed or wages are not paid for a long time. People go out into the streets and somehow defend their specific economic loss. But these may no longer be one-off actions; there may be many such enterprises. By the way, Vladimir, if, for example, we really run out of the Reserve Fund this year or early next year, and there will be big holes in the budget. Maybe this will turn into the fact that interruptions in the payment of salaries will begin.

V. Nazarov- It must be borne in mind that we have not yet exhausted all the reserves. We still have FNB.

S. Sorokina- This is a different story. It seems that he is not in order to extinguish budget holes.

V. Nazarov- Yes, but even the budget code states that it can be used for the purposes of the pension system. And you can, in principle, understand its deficiency. This is one of the main burdens for the federal budget - financing the deficit of the pension system. Therefore, understanding the functions of the FNB so flexibly, in principle it can be used ...

S. Sorokina- We talked about the situation in the pension system and, frankly, we would not want this fund to be exhausted so quickly.

V. Nazarov- Unfortunately, I am afraid that we will exhaust this fund, we will increase borrowings. But, most likely, it will be all within reasonable limits. That is, they will stretch the use of the Reserve Fund for as long as possible, then they will use the stretching of the National Welfare Fund for as long as possible. They will borrow wisely. But this is also not the end of the story. That is, you can keep it that way for several years. And then you have to do something.

S. Sorokina- That is, in the near future, after all, there will be no such non-payments.

V. Nazarov- Mass non-payments are absolutely incomprehensible why they would suddenly arise. Because, accordingly, in the public sector, the obligations are at the very least fulfilled. In the private sector, too, this is still not a drop of 10-20%, this is a slow stagnation. Moreover, our economy is mainly responsible, our salaries are actually flexible, therefore, most likely, it will not be about non-payment of salaries, but about reductions.

S. Sorokina- There are also research results that indicate a serious drop in the business activity index.

V. Nazarov- Yes, but that's what I said, that the investment climate is deteriorating accordingly. But this needs to be interrupted precisely by structural reforms, which are being talked about all the time.

S. Sorokina- I remembered the wonderful Viktor Stepanovich Chernomyrdin, one of his wonderful sayings: our grandchildren will still envy us. This is how it feels.

N. Petrov- Svetlana, it seems to me that this is a very correct story in the sense that today we are talking mainly about whether we will make it, whether we will have enough. We'll make it to payday in the family budget. But there will be no pay, that's the point. That is, we are now talking about when we will finally use up the money that has accumulated and that is in the stash. And the worst thing, it seems to me, is not that we are counting on a year, two or a year and a half, but that further those reforms that Vladimir is talking about, they also do not give an instant result. And they require certain funds on their own. That is, we will come naked to a situation where it is impossible not to make reforms, but when any reforms will be insanely painful.

N. Petrov: We will come naked to a situation where it is impossible not to make reforms, but when any reforms will be insanely painful

S. Sorokina“And the situation of the same population is getting worse. Here's what I've been thinking about. The horror lies in the fact that even if we somehow pull the wonderful and last fund for the second time, it will still not even be for 10-20 years, when something else can be done. It's still much shorter.

V. Nazarov- Yes, I would even aggravate whether we will last with this fund until the global economic crisis that will be caused by the fall of China. The biggest risk facing the global economy right now is the Chinese economy.

S. Sorokina- When can this happen?

V. Nazarov- We do not know. But it's a huge bubble. Which is comparable in scale to the American mortgage in 2008. And in principle, now the Chinese economy is a huge construction complex, which is not very clear what is being built. And it is very similar to the Soviet system, when you have huge savings of the population, that is, the population trusts banks very much, brings money there, respectively, the public's money goes in liabilities, other credit resources, and you have a huge construction site in assets. In the Soviet Union, these were tanks, guns, rockets.

S. Sorokina- And China.

V. Nazarov- And when they wonder where our Soviet savings went, but they were invested in Africa, they supported the rebels. Tank factories - that's your money, they are there. But when you need to buy food, food with this money, no one ...

S. Sorokina- And in China.

V. Nazarov There's endless construction. Build roads, airports, railways.

S. Sorokina“It's a good investment.

V. Nazarov“That's good, but up to a point. When you start spending 40% of GDP on this, this is probably not very normal. When it is, relatively speaking, the Shanghai-Beijing road, it pays off a lot. And when the roads are somewhere in the northwestern part of China, where even by Chinese standards there are no people, who will drive on them. What will they carry. Absolutely incomprehensible. And it's like a snowball growing.

S. Sorokina- Volodya, how do experts think, after what time can a crisis happen?

V. Nazarov“The faith in the Chinese economy is the same as in US mortgage bonds. If you watched the film American Big Shore, then there are the main characters who saw according to statistics that the crisis is inevitable, they invested accordingly in the fall of the American economy and decided to make money on it. Well, they had to wait over a year. They thought it would fall tomorrow, because it doesn't happen at all when...

S. Sorokina- That is, it is not clear when.

V. Nazarov“Most likely it will take several years.

S. Sorokina- That is, all the same within a decade.

V. Nazarov- Absolutely. And then we will see, respectively, the price of oil in the region of $20 per barrel.

S. Sorokina- And then what?

V. Nazarov- And then, of course, no matter what Reserve Funds we have, we will have very big problems. Therefore, we still need to carry out these reforms more intensively, not to think that we have these three years. Because at any moment there can be a click ...

S. Sorokina- Again I remembered Viktor Stepanovich, who said, already in recent years, being out of power, when he looked at these crazy oil prices, he said: oh, my government should have such prices, we had something. I suddenly thought that the prices there were very low. Below $20. They were quite small.

V. Nazarov - 8- 9 was.

N. Petrov But the dollar was still more expensive then than it is today.

V. Nazarov- At current prices, this is conditionally speaking in the region of 20.

S. Sorokina- And somehow they got out. Maybe there were fewer global image projects. In the second part of the program, I would really like to talk about what the possibilities are. Well, unless we sit and wait until we finally use up these funds, there should have been some options and opportunities. Some borrowing external and internal. Reduction of some own expenses, which, probably, will have to be done or some lines of the budget. Now I wanted to ask you something. And how much of this FNB we have now. He was more or less consistent. Because if the Reserve Fund is just a fall, then the national welfare kept more or less even. How much money is there?

V. Nazarov- It's about 5 trillion. Accordingly, approximately 70 billion dollars. But part of this money, unfortunately, is not invested in the most liquid things. About a third. And this third is better never to count on it. We can assume that we do not have it.

S. Sorokina On this optimistic note, we

let's break now.

S. Sorokina- We welcome you again. We are talking about the results of a recent study by the HSE Development Center, which says that we have not reached the bottom in the economy, that the Reserve Fund may be exhausted before the end of this year. As Vladimir Nazarov corrected, probably before the start of the next one. Forgive me for laughing, but this is already apparently nervous. And that we will eat up the National Welfare Fund too, because there are significant holes in the budget. Now let's talk about this. Of course, there are some necessary actions that should obviously be taken. What can be here. There may be spending cuts and external and internal borrowing. What might these abbreviations be? The first thing that might happen is they write to us: there will be football in 2018, elections, so everything is great. Indeed, there are such colossal projects for which, as it seems, today there is simply no money and an urgent need to either freeze or refuse. There is indeed football in 2018. Can we somehow reduce this project or not?

V. Nazarov- Personally, I was in favor of reducing the number of cities in which the World Cup is held.

S. Sorokina- I am terrified. From one St. Petersburg arena, where unmeasured billions leave, and whether to leave, it seems to me that we cannot afford it.

V. Nazarov- But now we have got into the majority of expenses and I am afraid that it is too late to change anything there. Meaning, a significant part of the costs has either been done ...

S. Sorokina- Then we will accept those who will play on our fields.

V. Nazarov- It's not as big money as construction anyway. Actually, the events there, the lion's share of the costs are still for security, for everything.

S. Sorokina- The largest construction projects are our new cosmodrome, for example, a bridge across the Kerch Strait. What else from the colossal, from which you can’t refuse in any way and what swells money.

V. Nazarov- The spaceport is already done. The bridge is also an inevitable story. Another thing is that, in principle, these expenses really look like waste against the background of what is happening. But they do not make the weather, if we abandoned the cosmodrome, then relatively speaking, 20 billion rubles.

S. Sorokina- Little things.

V. Nazarov- That is, if such projects get a pool, then you can save a lot.

S. Sorokina- Isn't the Ministry of Finance considering such options?

V. Nazarov- Well, every year this battle takes place, every year, respectively, the Ministry of Finance tries, somewhere it succeeds, somewhere it doesn’t.

S. Sorokina- That is, we cannot save on these colossal construction projects.

V. Nazarov- In the future, they do not need to be started. Don't even start new ones.

S. Sorokina Yes, Nikolai Vladimirovich.

N. Petrov“Firstly, with construction sites, everything is really arranged in such a way that from a certain moment it costs more to stop a construction site and mothball it than to finish it. When it all started, there was a different financial and economic situation, different expectations. But I would remind you that with the 2018 program, the government made significant cuts in the planned costs due to the fact that it was proposed to invest in infrastructure much less and mainly from regional budgets. At first, it was supposed to build not so much stadiums as to upset airports and roads.

S. Sorokina“Today I look with horror at how much money Moscow is pumping into its kilometer-long sidewalks. This seems to me to be an unnecessary waste.

N. Petrov“Looks a little like a feast during the plague. Not to mention that the value of what is being done is doubtful to the consumer. But there are still huge projects that were not mentioned. These are pipes. This is a pipe to China, it is not clear with what economic indicators given that the Chinese economy is not in the best position. And the price of gas, which is supposed to go there through these pipes, has not been fixed. That is, we will build pipes, invest huge amounts of money, but it's another matter that after all, it's not just throwing money away. This is the production of pipes, construction and installation works. Therefore, when we look at GDP, these figures include absolutely economically inefficient costs, which are gigantic public investments and which help GDP look more decent than it would look if all the money was spent purely rationally.

S. Sorokina- Can't this be preserved somehow?

V. Nazarov- The pipeline is a separate discussion. In general, our state corporations are not very efficient.

S. Sorokina- That's for sure.

V. Nazarov- And the expenses that they make, of course, they do not climb into any gates. Therefore, in my opinion, it is privatization that is the main thing that needs to be done now. Because at the same time it will allow filling the budget and somehow increasing the efficiency of these enterprises. And most importantly, to transfer their possible future problems and debts from the budget to their future owners, who will cope with them, unlike the budget.

S. Sorokina- The next question in sms: who will be the first to fall under the knife of funding cuts? What sectors. My feeling is that we need to cut the military. Still the largest share in the budget. The most luxurious life can be said, the budget is like that of a warring country. And it seems to me that we need to tighten up here. But this is more of a political issue.

N. Petrov“Unfortunately, these are the three sacred cows of the budget, which the Ministry of Finance, even if it really wants to, cannot take a swing at. These are the military-industrial complex, spending on defense and security in general, this is the pension system and these are social obligations. Look, even despite the fact that we have an election year, our pensions are not indexed in full.

N. Petrov: Three sacred cows of the budget, which the Ministry of Finance, even if it really wants to, cannot aim at

S. Sorokina- That is, you can encroach on pensions. But the military cannot.

N. Petrov- Encroachment on any of these cows is seriously a very serious social problem. And they are social with the military-industrial complex, too. These are millions of people who have received some kind of state orders, they are doing something for them, and so on. We already see social obligations as they are being squeezed.

S. Sorokina“It's not a very sacred cow anymore.

N. Petrov- More vigorously tighten, then there may be an explosion and the pension system. And then the Ministry of Finance simply proportionally reduces everything that is possible.

V. Nazarov“Actually, yes, really, we should give up the sacred cows. Therefore, if we single out some industry and say that there is no need to do anything at all, only to increase, then the burden on others increases disproportionately. And it turns out that some absolutely monstrous things have to be done there.

S. Sorokina- We have already understood about the retirement cow. They do not index, next year they will already remove pensions from working pensioners.

V. Nazarov“It's not going to be that hard.

S. Sorokina“Behind the scenes, you confessed. With social obligations, there is simply nowhere to cut.

V. Nazarov- Why, we even carry out 800 support measures from the federal level. Social support. Each of 10 people 7 receive different types of social support. Of these, those who really need these measures are most likely 2-3.

S. Sorokina We have talked about targeting a thousand times.

V. Nazarov“Now is exactly the moment when it's time to move from words to deeds, because there is a need to save money and there is a real need to help the poorest segments of the population.

S. Sorokina“When are you going to deal with all of this?”

V. Nazarov- We talked about it for a long time. I headed the Poverty Strategy 2020 group for targeting, and we wrote a whole section there, and everyone seemed to like it. But of course, nothing has been done, and so far our progress in this regard is more than modest. But I hope that after some elections this opportunity will open up, because now at such a dangerous ...

S. Sorokina- What would you cut from this long list?

V. Nazarov“In principle, you need to be very careful about this. First of all, we need such measures as not indexing these benefits. Distributing them only to the recipient of benefits, and not to all family members. Rationing, that when not all of your housing and communal services, but only according to certain standards, are paid. By such measures of providing benefits only to the poor, it is necessary to somehow settle this system. And with the money saved, introduce benefits precisely according to need. To make a normal allowance for the poor strata of the population, which would bring their incomes up to the subsistence level.

S. Sorokina“Still, consider raising the retirement age.

V. Nazarov- Retirement is a must.

S. Sorokina- And those categories that retire early are far from always a working story today.

V. Nazarov- And according to the military, I think that this is not a sacred cow. It is necessary to reduce, of course, it is unlikely that this will be done abruptly, but slowly, in my opinion, this is justified. There’s no need to jump in, but when now these enterprises work in three shifts, they raise prices, monstrous things are happening in this military-industrial complex, to abandon the strangest things, not to close this enterprise, but at least switch to one and a half shifts.

S. Sorokina- And we get the mysterious Armata tank, which we are proud of, although no one has looked inside with a sober eye.

V. Nazarov“Maybe you shouldn’t look there.

S. Sorokina“Better not get upset. Your attitude to how and where to cut.

N. Petrov- It seems to me that the fundamental story is what distance we run. What the Ministry of Finance proposes is quite rational from the point of view of the Ministry of Finance, but it does not allow us to see the light at the end of the tunnel. That is, it allows you to shrink and spend maybe less, but when we proportionally start spending less, then the expectation is that there will be some kind of engine that will drag the economy further only to some external miracle. Oil prices have risen, or others have done poorly, and against this background we look more or less decent. That is, this savings program, which is being implemented by the Ministry of Finance, and what else should he do, it is like a survival program, and not a program associated with some kind of prospects. And there must certainly be some priorities. It is not just necessary to press everyone and not just to threaten the sacred cows. It's already happening. The military program of the military-industrial complex is shifting in time, that is, the money seems to be the same. But we will spend them later. But it is necessary to determine priorities, and indeed, as Vladimir quite rightly says, it is necessary to include private business. Include real cars that can drag, realizing that state-owned companies are a significantly less efficient economic construct, just based on all our previous experience.

S. Sorokina- Our private business is intimidated and is not in the best condition. There was something else I wanted to ask about. After all, if we talk about a certain reduction in military budget expenditures, for this we must stop considering everyone around us enemies a little. This is about politics. And our isolationist doctrine, which we have been adhering to lately, must somehow be revised. Only in this case we can be not with the budget of a warring country, but with some slightly more modest one.

N. Petrov- It's true. But this just refers to those political restrictions, the conditions within which the government and the Ministry of Finance further build their own strategy. It's not them, it's not the government that decides. And I think, my assessment, we have not yet talked about the fact that there is an election trap. We will now go through one election, and the next one is scheduled for 2018. And if we drag out time until 2018 and do not carry out any serious reforms, and they are certainly painful and unpopular, then by 2018 we will definitely crawl, having depleted both of our funds. And the question arises, the elections were spaced about like the 2018 World Cup. In a situation where it seemed that every next day was better than the previous one. Today this is not the case and today it is necessary to look for political solutions. It can be either early presidential elections, which allow you not to spend a year and a half just waiting. And start some serious program of measures.

S. Sorokina- Or something else, changing your relationship with the outside world.

N. Petrov- Undoubtedly.

S. Sorokina- Here's another one. There is a position not only to look for funds inside, but also external borrowing. Just these sanctions, which were formed with well-known events, strongly tie hands in the sense of external borrowing. How seriously this prevents us from borrowing outside. Volodya.

V. Nazarov- Of course it interferes. But so far, it was literally at the last moment that we managed to place our Eurobonds at a fairly low rate. 4% each. But in the spring there was such a demarche on the part of EuroClear, when they refused to service the issue, and as a result, Russia took almost 4.6%, but you have to understand that this is a ten-year issue. On a ten-year horizon, even 1% is money. Therefore, of course, sanctions interfere. But I, too, would not look at borrowing as a lifesaver. They make sense if your interest rate on borrowing is much less than the GDP growth rate. Obviously, our GDP in dollar terms is not growing by 4% per year. Therefore, we must understand that we are only prolonging this certain time, yes, we can carry out these reforms not so quickly and not so painfully, but still we must do it. Because sooner or later the debt will become very large, we will not be able to service it.

S. Sorokina“But there is another side. Investments do not come from outside either.

V. Nazarov- This is the key problem. This is a much more important problem than the laboriousness of government borrowing. Because I believe that our domestic demand is very limited. It cannot be a driver of large-scale economic growth. We must conquer foreign markets, look for niches there. To do this, we need technology and investment. If they are not, it is certainly a dead end branch.

S. Sorokina- Despite the fact that at the St. Petersburg Economic Forum they once again said how great everything is and how everyone is eager to just invest their dollars and euros in our economy, as I understand it, this is all somewhat wrong. And if we are talking about the same privatization that private business should pull, then how about it. It's complicated.

V. Nazarov“For this, judicial reform is needed, absolutely necessary. And you need to show that there are still guarantees of property rights in the country, you just need ...

S. Sorokina“That is, start and finish everything again.

V. Nazarov- In fact, a much more fundamental task than balancing the budget. The budget can be balanced...

S. Sorokina- But not everything fits into one line of the budget or one word. Yes please.

N. Petrov- And, unfortunately, we must understand that we do not stand still. And we are rapidly moving backwards. What Vladimir said about the judiciary and the guarantee of property rights, let's look at the dynamics. The fact that this should be done is said always and regularly. But look, in recent months, here we have a Mason, here we have Yevtushenkov, here we have a public demonstration of how these property rights are not guaranteed. Our Arbitration Court has finally disappeared as an independent third highest court, and for this we even made changes to the Constitution. And the Supreme Court has moved or is moving to St. Petersburg. That is, it seems to me that yes, of course, judicial reform is more than overdue. But what we see is a sharp movement in the opposite direction.

S. Sorokina“So wishes remain wishes. Nothing happens. And besides, of course, if the history of disengagement from the entire surrounding world continues, then it seems to me that we will continue to roll back in all directions. Because what other options. Inside, twist everything and remain proud, offended and not communicating with everyone. I do not understand whether we still have any chances to break through this external blockade of ours.

N. Petrov- I think that it is politically possible, but it is hardly possible cardinally. That is, I would not be surprised if, after some time after the Duma elections, namely, after waiting for the American elections and seeing what is happening in Europe, the authorities nevertheless took some, took some steps aimed at softening the confrontation with the West. Another thing is that it is difficult to expect any radical changes. We can expect a demonstration of readiness to carry out reforms in the economy, some appointments, some positive steps, and we have seen quite a few of them, including in the Ukrainian direction. But I'm afraid that all this will be done in order to go to the market, take money and use this money to buy an opportunity ...

S. Sorokina- Still live. But not radically. And most importantly, you don’t really understand what can be radical. After all, Crimea will not be returned anyway.

V. Nazarov I don't think it's worth the drama. Because, in principle, everyone is interested in the situation returning to normal. That is, the world is globalizing and it is clear that it is better to have a Russia integrated into this global world than a Russia that bristles, withdraws into itself and does not understand what it is doing. Therefore, as I think, practically ordinary inhabitants and the so-called Russian elites, the same abroad are still interested in finding some ways to solve these problems. And we have the experience of a number of countries, both China and Iran, sanctions were imposed, then they were lifted. The main thing is just to work in this direction. And not in reverse. That is, if you go in the opposite direction, it is difficult for you to reach the goal.

S. Sorokina- Yes it is clear. Well, actually, such disappointing conclusions. Actually, it's a pretty straightforward story. I really hope that the information reaches the very top, and it is not very distorted. That is, they still see a picture of the world. And I think these are obvious things. Starting from judicial reform and support for private business to openness to a greater world and to political flexibility within the country as well. These are such obvious things. Do you have even the slightest hope that this will still happen? Soon.

V. Nazarov- While I breathe I hope.

S. Sorokina- So. Volodya said it. Please.

N. Petrov- He will certainly wait, he must be an optimist.

S. Sorokina- He is young.

N. Petrov- Due to age. It seems to me that the problem is that all the factors you are talking about did not appear today. They were both yesterday and a year ago. But, unfortunately, in many directions there is a movement in the opposite direction.

S. Sorokina- Okay. This is where we end. We just can't take much longer. We talked about the imminent exhaustion of the Reserve Fund and about what will happen to us next, or at least should happen. Goodbye, see you next week.

Because it ran out of money. The Insider explains what this means for the country and what threatens the Russians.

What is the Reserve Fund and where did it come from?

On February 1, 2008, the Stabilization Fund of Russia (part of the total gold and foreign exchange reserves) was divided into the Reserve Fund and the National Welfare Fund. The reserve fund is part of the federal budget, which was replenished from the proceeds from the sale of oil, gas and condensate, and was spent to finance the budget deficit. During the period of high oil prices, the reserve fund grew, but in recent years it has steadily fallen.

What were the resources of the Reserve Fund?

The reserve fund was placed in highly liquid foreign currency or assets denominated in foreign currency. Therefore, the funds of the fund were part of the gold and foreign exchange reserves of Russia, but unlike the rest of the assets of the gold and foreign exchange reserves, they were at the disposal of the Ministry of Finance, and not the Central Bank.

Does this mean that the state is bankrupt?

No. The total gold and foreign exchange reserves of the Central Bank, on the contrary, have recently been growing and exceeded $430 billion in December. True, foreign debt has also been growing (in February last year, the Central Bank announced that the debt had reached a critical level of 42 percent of GDP, a record figure for Russia).

Why has the Reserve Fund been depleted and what does this mean for Russians? Director of the Institute for Strategic Analysis Igor Nikolaev explains on his fingers

“It happened because there is not enough money. Accordingly, expenditures in the budget significantly exceed revenues. That is, the economy does not generate so much money to satisfy all spending needs, despite the fact that spending is already tight, over the past few years, as we know, there has been a significant indexation of pensions. And yet, there was not enough money. In order to fulfill obligations in some way, this money must be taken from somewhere. The reserve fund was spent. Several trillion rubles have been spent over the past three years. When they say, “well, there is a crisis, but we didn’t feel anything,” they didn’t feel it, because we spent our little money.

We ate half of our pod from two funds. If the economy continues to be in this state, even if it is not falling, but not growing, the budget will still be in deficit, and money will still have to be taken from somewhere to cover this deficit. This means that in general we will have only one fund left, the National Welfare Fund. And if we also spend the second fund, and the economy still does not work, then we will have to cut spending very sharply, drastically.”

Why can't you just spend the funds of the Central Bank's reserves? After all, they just got bigger.

“The waste of the Central Bank reserves means that the country is doing very badly, there are no reserves left, and they have already taken on the most emergency reserve. Our credit and sovereign ratings will be immediately downgraded, and the ratings of our companies will be immediately downgraded. And investors will have a very definite attitude towards such a country. It is practically a bankrupt country. We already have huge problems with borrowing funds, since sanctions have been introduced.

It should also be taken into account that the Central Bank is an independent body from the government. Funds from the Central Bank can, in principle, be spent, but they are not used to finance the budget deficit. We are not yet in a state of bankruptcy, so we are spending money from government funds.”