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. Last Updated: 07/27/2016

Kudrin Urges 2nd Oil Fund

The country's rainy-day savings should be limited to 7 percent to 10 percent of gross domestic product, while the rest should go into a separate fund for future generations, Finance Minister Alexei Kudrin said Wednesday.

The split is likely to allow Russia to invest money from the new fund in a less conservative way and buy shares in blue-chip companies, boosting government revenues from the windfall.

"I think that reserves accumulated as a cushion against a fall in oil prices should stay at a level of 7 percent to 10 percent of GDP. Funds exceeding this level should go into the stabilization fund," Kudrin told a parliamentary hearing.

The fund collects oil extraction and export taxes levied on oil priced above $27 per barrel. With world oil prices around $64, the fund has been growing rapidly.

The fund, currently at $64 billion, makes up 6.4 percent of GDP. The government tapped it last month to pay debt to the Paris Club of creditor nations.

"Most likely, we will break the threshold of 7 to 10 percent next year," Kudrin said, adding that the Finance Ministry planned to submit proposals regarding the stabilization fund in October.

The Finance Ministry and Central Bank signed an agreement in July, paving the way for investing the fund.

The ministry plans to deposit 45 percent of the fund in dollars, another 45 percent in euros and 10 percent in pounds sterling. It has already converted 400 billion rubles ($14.94 billion).

Under the agreement, an investment in a portfolio of AAA-rated securities corresponding to the currency structure should yield 4 percent per year with global interest rates at current levels.