World Economy

Russia Budget $38b Shy

Russia Budget $38b ShyRussia Budget $38b Shy

Russian Finance Minister Anton Siluanov said in a television interview on Saturday that the fall in oil prices meant the Russian budget would be short of more than three trillion rubles ($38.6 billion) of income.

Russia’s economy has been hammered by the collapse in global oil prices since mid-2014 as energy sales account for roughly half of federal budget revenues, Reuters reported.

Its current budget for 2016 was calculated based on a Urals oil price of $50. Urals, Russia’s main export blend, traded at around $27 on Friday.

“Therefore there is a difference of two times, and I want to say that for budget income this difference equates to over three trillion rubles,” Siluanov said in an interview on the current affairs program Vesti on Saturday with Sergei Brilev.

The oil price slide has also put pressure on the ruble, which is down over 50% versus the dollar since oil prices started a relentless drive downwards.

But Siluanov said the ruble had weathered the worst because oil prices could not fall as far as they already have from their previous peak.

“Our main export commodity, as we have already discussed, fell in price by four times,” Siluanov said. “One can hardly expect prices to fall four times further compared to today’s level.”

He added that Russia would have to use part of its National Wealth Fund to cover the budget deficit in 2016, if measures were not taken to bring Russia’s budget in line with the new oil price reality.

The NWF is one of Russia’s two rainy-day sovereign funds, alongside the Reserve Fund. Part of the NWF is already invested in infrastructure projects.

  Spending Cuts

Russian Prime Minister Dmitry Medvedev has ordered the government to decide which spending could be significantly cut, saying that a dramatic fall in oil prices was creating serious risks for the budget.

This year’s budget assumes an average oil price of $50 per barrel and a budget deficit of 3% of gross domestic product. Russian Finance Minister Anton Siluanov has already called for the oil price assumption to be revised to $40 per barrel.

“The figures in the budget now already seem excessive, Medvedev told a government meeting.”The dramatic move in the oil prices which we see over recent weeks creates highly serious risks for budget fulfillment.”

“We need to adjust the expenditure part of the budget, bringing it in line with expected incomes.”