Exclusive: Russia could rebuild fiscal reserves at $55 oil price

By Darya Korsunskaya

By Darya Korsunskaya


MOSCOW (Reuters) - Russia is considering a new budget rule that would keep the rouble weak and mean its depleted fiscal buffers start recovering at a Urals crude price of $55, finance ministry documents seen by Reuters showed on Thursday.


Russia wants to avoid fully depleting its battered fiscal reserves, which have been used to plug holes in the budget since its economy entered a deep slump following the collapse in global oil prices from mid-2014.


According to the new budget rule outlined in the documents, Russia would limit spending from its fiscal reserves if prices for Urals crude <URL-E> average between $40 and $55 a barrel by using energy revenues earned when oil prices are higher than $40 to reduce the budget deficit.

If Urals averages $55 a barrel or above those energy revenues earned over $40 a barrel would be sufficient to start topping up the country's rainy-day Reserve Fund, which some economists had expected to run out in 2017.

The budget rule under consideration tallies with President Vladimir Putin's aim of pursuing a prudent fiscal policy to help insulate Russia against external pressure at a time when the country is under Western sanctions over the Ukraine conflict.

It would help contain the 2017 budget deficit and restrain recent gains in the rouble, which have prompted official concern as they could hurt Russian exporters.

That downward pressure on the rouble would have an adverse impact on household consumption but could make the economy healthier overall.

Russia used to have a budget rule tied to average oil prices over preceding years, but that rule was suspended in 2015.

The price for Urals, Russia's main export blend, was at around $52 on Thursday, above the level of $40 the finance ministry used for this year's budget plans.

The World Bank and International Monetary Fund had advised Russia to readopt a budget rule, since stronger fiscal buffers are seen helping the country withstand external shocks.


Under the proposed new rule, Russia would channel 241 billion roubles ($4.02 billion) into its fiscal funds when the Urals price averages $55 a barrel.

That would mean the finance ministry would channel on average less than $50 million a day to the funds, according to Reuters calculations.

The finance ministry documents show the ministry sees the Russian rouble at around 64.9 against the dollar with Urals at $55 and the budget rule in place versus its level of around 59.8 on Thursday.

The central bank said on Thursday that were Russia to start buying foreign currency for fiscal reasons, it would do so in an amount that would not overshoot the extra monthly revenues Russia gets from oil prices exceeding $40.

The central bank did not provide any possible timing for the forex purchases.

Even if Urals prices were to rise to $70, the finance ministry sees the rouble at around 61 versus the dollar if the new budget rule is implemented.

It sees this year's budget deficit at 0.7 percent of gross domestic product if Urals averages $55 a barrel and 1.5 percent of GDP without the rule.

Finance Minister Anton Siluanov said on Wednesday the decision not to spend additional oil revenues on new budget spending would give the central bank more room to cut interest rates.

(Writing by Alexander Winning and Andrey Ostroukh; Editing by Ralph Boulton)