Russia moves 1.17bn rubles from culture projects to its reserves

10 Jul 20

More than 1bn rubles earmarked by the Russian government for cultural projects have been redirected to its reserves as the country battles the Covid-19 crisis.

The money was originally due to be spent on modernising cinemas as well as holding festivals and exhibitions, as part of a national project called ‘Culture’.

As part of the plans, 200 cinema halls were supposed to be renovated, but that has now dropped to 60, while festivals will now be “more local” and will only take place where lockdown measures have been completely lifted, deputy culture minister Olga Yarilova said.

She said the 1.168bn rubles (£13m) saved will be sent to the reserves, according to Russian news agency Tass.

Russia has been hit hard by the pandemic, and its public finances were already beginning to strain under the plummeting price of crude oil, which dropped by 65% between January and April this year – although this was followed by a partial recovery.

The general government budget deficit is expected to be 7.2% this year, to be financed by historical oil revenues saved in its National Wealth Fund, which is separate from the reserve fund that will benefit from the redirection of the Culture budget.

According to Russia’s fiscal rule, when oil falls below a benchmark price (currently $42.40 per barrel), the government can withdraw an amount equal to its oil and gas revenues from the NWF to supplement the shortfall.

Covid-19 means this year GDP could fall by about 6%, with a “moderate” recovery possible if lockdown measures are fully lifted in the second half of the year, the World Bank projected in a report it released this week.

Unemployment rose to 6.1% in May, up from 4.5% a year earlier – an increase of about 1.1 million people.

And the risk of a more protracted pandemic and the associated containment measures that could come with it, along with further drops in commodity prices, could mean the Russian economy ends the year in a much worse shape, the World Bank warned.

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