Page 95 - RusRPTMar23

Further depletion of buffers going forward. As of now, the budget law allows for an additional RUB4.2 trillion from the NWF to be used for fiscal financing in 2023-24. But deficits will likely be much larger than authorities assume— possibly around 6% of GDP this year and next—and pressure on the NWF grow.
Liquid NWF assets largely used up this year. The Ministry of Finance expects total assets to decline to around RUB6.6 trillion (or 3.6% of GDP) by the end of 2024, with the liquid portion of the NWF declining to RUB2.3 trillion (1.4% of GDP). KSE view, however, lower oil prices will significantly weigh on fiscal revenues and, thus, sharply increase fiscal financing needs. As a result, we expect that liquid assets will largely be used up before the end of 2023.
The asset quality is deteriorating. Over 2022Q3-Q4, the NWF lost a significant share of its high-quality assets—including 80% of euro- (-$42bn) and the entirety of pound- and yen-denominated ones (-$13bn). This means that remaining liquid assets overwhelmingly consist of yuan ($45bn) and gold ($30bn).
Tough decisions on government spending loom. With costs of the war rising and revenues under pressure, depletion of the NWF will force authorities to cut non-military expenditures. At this critical junction, targeted new or expanded sanctions could have a strong impact on Russia’s ability to continue the war.
95 RUSSIA Country Report March 2023 www.intellinews.com