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Russia: Key Reserve Fund to Run Dry by End of Next Year

FILE - People walk past a currency exchange rate display in central Moscow, Dec. 1, 2014.

Russia says it will likely deplete one of its two rainy day funds by the end of next year as it tries to plug the state deficit amid the economic downturn.

The economy fell into recession this year for the first time since 2009 due to Western sanctions and a drop in prices for the country's crucial energy exports. Personal incomes have fallen for the first time since President Vladimir Putin came to power 15 years ago.

Finance Minister Anton Siluanov told the parliament on Tuesday that the Reserve Fund, which holds 4.7 trillion rubles ($74 billion), is likely to halve by the end of the year with oil prices as low as they are.

"This means that 2016 could be the last year when we have these reserves to spend," Siluanov said. "From then on, we will have no resources like this."

As oil prices began to climb in the mid-2000s, Russia decided to set aside some profits from oil exports into two rainy day funds. The second one, the National Welfare Fund, now holds $4.9 trillion rubles and is largely used to support infrastructure projects.

Unlike in the 1990s, Russia is much better prepared for a recession as its debt levels are low and the currency, the ruble, trades freely on markets.

The Russian economy is forecast to contract by 3.9 percent this year and grow by 0.7 percent next year.