December 2, 2019 / 11:01 AM / 13 days ago

Russia proposes $15.7 bln spend from National Wealth Fund in 2020-2022

MOSCOW, Dec 2 (Reuters) - Russia has proposed spending 1 trillion roubles ($15.67 billion) from its National Wealth Fund to support infrastructure projects and exports between 2020 and 2022, as it tries to boost stalling economic growth under western sanctions.

Russia believes state spending could steer the oil-dependent economy through waning investment activity after the U.S. and other countries imposed financial sanctions in 2014, causing sharp swings in the rouble and suffocating investment activity.

Russia’s finance ministry, in a draft law published late on Friday, said it planned to use money from the National Wealth Fund to issue sovereign loans to countries that can use them to pay for Russian exports.

“(This) will ... minimise the significantly increased risks of seizure and blocking of Russian assets in foreign jurisdictions, primarily the U.S. and Western European countries, and, as a consequence, the complete loss of Russian investments due to unfriendly actions of foreign states against Russia.”

This should support the Russian economy, particularly its energy sector, the finance ministry said.

The ministry also said it planned to use the National Wealth Fund, which accumulates revenues from oil exports and was initially designed to support the country’s pension system, to cover up to 20% of loans required by infrastructure projects within Russia, although the rate of return should not be lower than for OFZ treasury bonds.

The National Wealth Fund was worth $124 billion as of Nov. 1, up from $58 billion in early 2019.

Gross domestic product growth, in contrast, is slowing despite numerous calls from President Vladimir Putin for Russia to outpace global GDP growth. Russian GDP growth is seen at around 1% in 2019 versus the 2.3% recorded in 2018.

The government will be able to use money from the National Wealth Fund once its liquid assets exceed 7% of GDP, something the finance ministry expects to happen in 2020.

The draft law, published by the finance ministry on the government regulation website http://regulation.gov.ru, is now set to be considered by the government and then will be passed over to parliament. ($1 = 63.8345 roubles) (Writing by Andrey Ostroukh Editing by Katya Golubkova and Kirsten Donovan)

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