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Russian Stabilization Fund was set up in January 2004 by a resolution of the Russian Government. The fund was created to balance the federal budget when the oil price falls below the cut off price which was $27 per barrel at that time.
Another reason for creating this Stabilization Fund in Russian Federation was to use it as a tool for reducing inflationary pressure across the country, insulating the economy from the fluctuations that occur in the export earnings from raw materials and absorbing the excess liquidity in circulation.
Stabilization Fund at Russia is managed by the Finance Ministry of the Russian Federation as per the directives of the Government of Russia. Some of the powers for asset management can be vested to the Central Bank of Russia through an agreement of the Government. The capital of the Stabilization fund in Russia is to be invested in foreign sovereign debt securities.
Collection and Consumption of Russian Stabilization Fund
Stabilization Fund of Russia is generated through the export duty for oil and tax charged on oil mining operations when the price for Urals oil exceeds the set cut off price. The fund is later used for covering the deficiency in the federal budget and in meeting other expenses, if the balance exceeds 500 billion rubles. In the year 2005, when the capital of the Russian Stabilization Fund exceeded the above mentioned target, the surplus was used in covering Russian Pension Fund's deficit and early foreign debt payments.
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