Russia oil fund to cover budget shortfalls

By Toni Vorobyova

MOSCOW (Reuters) - Russia's oil wealth funds should cover any budget deficits for at least the next three years, and some of the money may also be used to give more support to the financial system, a Finance Ministry official said on Tuesday.

The funds, worth $222 billion (155.6 billion pounds) on February 1, were amassed as Russia reaped the benefits of high prices for key export oil and a year ago were split into a Reserve Fund aimed at plugging any budget holes and a longer-term focused National Wealth Fund.

But while then the hot topic was which assets and countries will benefit from NWF's investments, now both funds are needed to help Russia through the hardest economic climate in a decade.

"Undoubtedly we will have to use the means of the Reserve Fund already this year... A not insignificant share may be used for covering the budget deficit," said Pyotr Kazakevich, deputy head of the Finance Ministry's state assets department.

"But we think that both 2010 and 2011 we will also be able to use this resource."

Finance Minister Alexei Kudrin said last week that Russia may run a budget deficit of 6.1 percent of gross domestic product, while the Reserve Fund is set at around 10 percent of GDP and is currently worth $137.3 billion.

The $84.5 billion NWF has already provided 175 billion roubles for state share purchases which helped Moscow's bourses find a floor in late 2008 and 235 billion roubles for subordinated loans to commercial banks.

Moscow is expected to approve another round of capital injection for Russia's banking sector, which it has charged with financing the real economy, keeping the money market running and filling any funding holes left by the global credit crunch.