Long-Term Financial Stability in Russia

Abstract

Reserve Fund, National Wealth Fund and the funded part of the pension system are acting as a puffer to smooth the impact of external shocks on Russian federal budget. Sensibility for external shocks is the result of raw material exporter role of the country; witch affects not only the balance of capital account, but the economic activity and indirectly the demographic balance too. Russia has to face with external turmoils in the future due to the structure of its economy, so the strategy of forming sovereign wealth funds and de facto monopoly in the second pillar is logical strategy to smooth external shocks. But market based management human life cycle means that market risks – and the flow of global liquidity – will influent not only the active years but inactive years too, while these risks were transferred from the state to the individual trough the introduction of multipillar pension system. Therefore the introduction of multi pillar system can not care the problems of ageing, but establish a stable demand for government bonds.