Upbeat Russia to return to three-year budget planning

Upbeat Russia to return to three-year budget planning
Moscow City business district.
By bne IntelliNews March 16, 2016

The crisis is over! That is a conclusion that could be drawn from the Russian government's decision to return to its three-year budget planning cycle, according to recent comments made by First Deputy Prime Minister Igor Shuvalov, media reports said on March 16.

The government suspended the three-year planning cycle last October after the collapse of oil prices made a mockery of long-term budget estimates. Previously, the budget assumed that oil prices would average $50 in 2016, whereas under the new plan now being drawn up the assumption was reduced to $35-$40. However, a final version of the revised budget has yet to be released by Finance Minister Anton Siluanov.

In addition, the previous scheme arrived at the price of oil by averaging prices over three years – the so-called "budget rule" – which tends to underestimate the price of oil when it is rising and leads to a large surplus. However, this scheme doesn't work well when oil prices are falling and tends to lead to an overly large deficit. So the scheme was scrapped as the government needs to be more accurate in its guesses as to the price and the consequent deficit.

Talk has turned recently to a bottom in the oil markets in March after oil prices started to recover from an eight-year low of $27 in January. While the range of the average price estimates for 2016 is still up in the air, oil prices touched on $40 per barrel on March 7 and are probably going to be higher than $27 this year.

The Russian government seems to think so. The Cabinet of Ministers meeting on February 26 argued that the unexpected drop in oil prices has exhausted itself and a floor has been found, Kommersant daily reported. This process has been helped by mooted talks between Russia and OPEC members, slated to start in April, where a production "freeze" may be imposed. Regardless of what happens at the meeting (if it happens at all) the talk of a freeze has helped talk the price of oil up.

A new three-year plan is already being prepared by the Economics Ministry to cover the years 2017-2019, according to reports, and the ministry is supposed to submit its blue print to the finance, labour and energy ministries by March 18.

The new plan will be split into two parts: the first scenario is supposed to go to the Duma's budget committee by March 29 and the Central Bank of Russia (CBR) will send its proposals for three-year monetary policy to the Ministry of Finance on April 22.

Projections of budget expenditures will then be prepared in June-July, with the final budget to be approved by the Duma by September 15.

 

 

News

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss