The Russian government added 551.4 billion rubles ($9.5 billion) to its emergency reserve fund on Thursday as the Kremlin steps up its stimulus package in a bid to protect the economy from the impact of Western sanctions and its actions in Ukraine.
“The funds will be used in part to implement measures aimed at ensuring the stability of economic development in the conditions of external constraints,” the government said in a statement announcing the cash injection.
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The reserves boost came from extra profits generated by Russia’s vital oil and gas exports, which are bringing in hundreds of millions of dollars a day to the budget despite Western sanctions.
Western countries have hit Russia with an unprecedented package of sanctions, including freezing around half – or $300 billion – of the central bank’s gold and foreign currency reserves after Moscow sent tens of thousands of troops into Ukraine on February 24 in what it calls a “special military operation.”
Russia previously directed oil and gas profits into its $198 billion sovereign wealth fund, a rainy-day war chest intended to fund large investment projects.
But the emergency reserve fund is a more flexible pot of cash, allowing the government to plug its own deficit, support social outlays such as a recent emergency hike in pensions and react to the looming economic crisis.
The government added 791.6 billion rubles ($13.56 billion) to the same fund in May.
Russia’s economy is set for its biggest recession in more than two decades as it faces what the Institute of International Finance has termed a “full disintegration of 30 years of investment” that could wipe out 15 years’ worth of economic gains.
The Kremlin has already started deploying its resources to support the country’s largest businesses in an attempt to alleviate an economic crisis that has already seen inflation rise to its highest levels in two decades and is set to see household earnings plunge in the coming months.
In May, the government injected $4 billion to Russian Railways, the country’s largest employer, and has pledged $1.75 billion for state-owned airline Aeroflot.
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