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The Russians promised stability: the Ministry of Finance has developed the fiscal rule

The Ministry of Finance submitted to the government budget rule with a cut-off price of $40 per barrel of oil. All oil and gas revenues above this level will flow into the Reserve Fund. It is planned that the fiscal rule will be fully operational from 2019


photo: Natalia Muslinkina

Recall, the government sets the cut-off price of oil. All oil and gas revenues that exceed that mark, does not go on the spending budget and reserves.

The Finance Ministry proposes to set cut off price at the level of 40 dollars per barrel. “We submitted to the government of the Russian Federation proposals of the budget legislation on the so-called budgetary rule, it is clearly determined that we take a base $ 40 per barrel with the adjustment for inflation of world currencies,” — said Finance Minister Anton Siluanov.

In his words, “to ensure the stability of the execution of budgetary commitments and to ensure a stable macro-economy, to enhance the price cut in the budgetary rule is inappropriate”.

In particular, if you raise the cut-off price up to $45 per barrel, then it will decrease the stability of the Treasury and will increase the dependence of volatility on world markets.

Meanwhile, former Finance Minister Alexei Kudrin insists on raising the price cut off to $ 45 per barrel. “We say — let’s live at 40 dollars, and I believe that it is possible to make a more compromising step — 45 dollars for barrel”, — noted ex-the Minister of Finance.

However, as the analyst of ALOR BROKER Kirill Yakovenko, in fact, the budget rule has already been applied. “The budget rule de facto. According to him, the budgeted oil price is $40 per barrel. This ensures optimum stability to the budget and the ruble. Now for a barrel of Brent provide over $53, but this growth should be seen more as speculative. As such, the dispersal of the quotes before the next OPEC meeting, scheduled for may 25. These high prices hold on hopes that an agreement on production cuts will be extended. However, factors that could tear the agreement very much,” — said the expert.

First of all, it is US actions that are increasing the development of shale oil. “In 2-3 years she will be able to replace the shortfall from the market due to the agreement, OPEC volumes, and thus will benefit most other players on the oil market”, — says Yakovenko.

Moreover, according to the expert, the very existence of the policy of withdrawal of additional oil revenues and sending them to the Reserve Fund says the instability of the Russian economy. “We need a big reserve in order to withstand future disasters. They are caused by a weak diversification and reliance on oil production,” continues Yakovenko.

Another paradox of fiscal rules — that the withdrawn from the bowels of funds into the financial denominated in foreign currency, and to freeze the funds. Although they could be used to develop infrastructure, increase economic growth. “However, next year the budget will be a lot of “attacks” with the intention to increase expenditure and, if possible, profitable. Elections are coming and someone will gain so points in the presidential race, and someone — knock the funding of social expenditure, which will also bring him his glasses,” — said the expert.

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