Russia Economics - 42 Initiatives for 2021-24, With ESG Theme to the Fore

On Monday, the government presented President Vladimir Putin with 42 initiatives for 2021-24. The aim is to achieve positive and visible changes within the next three years in various spheres that affect households. Prime Minister Mikhail Mishustin estimated the overall cost of these initiatives at R4.6 trln ($62.3 bln at the current exchange rate). However, the lion's share of this sum is already included in the federal budget.Budget spending will increase only modestly in 2021-24. The government estimates that budget spending will increase in 2021-24 by R504.8 bln ($6.8 bln), with R232 bln ($3.1 bln) coming from the National Wealth Fund. It also envisages the issuance of R150 bln in infrastructure bonds on top of the existing borrowing program. The increase in annual spending is not significant (R126 bln, or 0.1% of GDP per year) and will not destabilize the budget.The government is hoping for visible results before the next presidential elections in March 2024. To choose the projects, the government conducted special polls centered on topics that are important for the nation. The new initiatives will supplement the ongoing national projects and will not overlap with them.The initiatives have been put into six groups. Kommersant has given a financing breakdown for the initiatives. The ESG theme is important. The biggest category is "social," which will receive R264 bln of federal budget financing. This group includes the so-called "Pushkin Card," which will permit 17 mln young people to access museums and other cultural centers for free. It will also introduce a new system of professional education that will allow people to adapt to the digital world.The next biggest group (R131 bln from the budget and R119 bln from the NWF) is devoted to encouraging the development of technology. ESG will play an important role here and will support the development of nuclear and hydrogen energy and electric car design. Crucially, the government intends to encourage cooperation between businesses and universities.The environmental group will involve a "general cleanup" of the country. For example, there are 258 ships sunk at Russian ports, hampering navigation. Many buildings, plants and mines are run-down and the government plans to refurbish them. The recycling of waste products is another important project proposed by the government.Kommersant's figures appear to be preliminary, as summing up the numbers arrives at a figure of R532 bln, above the announced sum of R505 bln. We await more detailed information. However, the government's approach is understandable to us: it wants rapid and visible results in areas that the population will appreciate.The government plans to make very modest use of the NWF in 2021-24 - just R232 bln. Obviously, the government will have much more money than this available to it in the liquid part of the fund above 7% of GDP in the beginning of 2022. A discussion on how to invest this money probably lies further ahead.