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. Last Updated: 07/27/2016

OECD Hails Spending Plans And Stewardship of Oil Fund

Russia's plans to split its stabilization fund and to project government spending three years into the future are the country's "most important" recent policy development, the Organization for Economic Cooperation and Development said in a report published Thursday.

The steps represent an attempt at "prudent management of oil windfalls over the long term," the OECD said in its 2007 economic outlook report.

Russia began a transition to three-year budget planning this year to make government spending more efficient. Russia also plans to split its stabilization fund, where some revenue from oil is stored, into a Reserve Fund and a National Welfare Fund to safeguard the economy against oil price shocks. The stabilization fund reached $113.7 billion in April.

The Reserve Fund, to amount to 10 percent of the country's gross domestic product, will act as a cushion for government spending in case energy prices drop sharply. The National Welfare Fund will be invested to boost pensions and other social spending.

"The key will be the effective implementation of plans to improve the management of oil windfalls and reduce the non-oil budget deficit," the report said.

Russia's $1 trillion economy, the world's 10th biggest, is likely to expand this year at about the same pace as in 2006, when GDP grew 6.7 percent, according to the OECD. The growth will be driven by consumption, with the next elections posing a risk, the report said.

"Apart from oil-price movements, the electoral cycle of 2007-2008 is the major source of uncertainty," the OECD said. "The contest could lead to actions by various political groupings that would damage the investment environment and undermine confidence."

The 30-member OECD, which describes itself as a group of "like-minded" countries committed to "a market economy and a pluralistic democracy," invited Russia on May 16 to begin talks to join the OECD.