- Finance Ministry to ask lawmakers for change in 2016 budget
- Oil-reliant nations are adjusting to lower crude prices
Turbulence on energy and financial markets is forcing Russia to shorten its budget-planning horizon to one year in 2016, according to Finance Minister Anton Siluanov.
Given the increased risk of forecasting errors as a result of market volatility, the Finance Ministry will ask lawmakers to delay the deadline for submitting next year’s budget and shift to a one-year plan for 2016, Siluanov said in Moscow Tuesday. Russia has been adopting three-year fiscal programs starting with the 2008 budget, with the plan submitted annually before Oct. 1.
“To minimize the probability of errors in budget preparation, we suggest taking a pause for a more detailed evaluation of the current situation,” Siluanov said. “The volatility seen in recent weeks on world commodity and financial markets is raising the risks of mistakes in forecasting.”
Swings in crude prices are wreaking havoc for countries reliant on oil revenue, prompting Kazakhstan to devalue its currency last month and forcing adjustments in nations from Nigeria to Colombia. The ruble’s crisis has underscored the vulnerability of Russia, the world’s biggest energy exporter, to slumping oil, which together with gas accounts for about half of budget revenue.
Oil futures dropped as much as 4.4 percent in New York after surging 27 percent in the three days through Monday, the most since August 1990. Brent crude, used to price Russia’s main export blend Urals, decreased as much as $2.45, or 4.5 percent, to $51.70 a barrel on the London-based ICE Futures Europe exchange. The ruble is the world’s worst performer against the dollar in the past 12 months with a 43 percent drop.
Russian economic policies will differ depending on whether the price of oil is at $40 or $60 a barrel, with each scenario requiring different forecasts and budget parameters, Siluanov said. Russia needs oil at $80 a barrel to balance its budget, ING Bank NV estimated in May.
The Russian economy, about a quarter of which is linked to the energy industry, is succumbing to its first recession in six years, after a drop in oil prices compounded the damage exacted by sanctions over Ukraine. The budget is on course for its widest deficit in five years.
President Vladimir Putin’s top economic aide, Andrey Belousov, said it may be appropriate to opt against adopting a three-year plan and “as an exception” only to approve a one-year budget for 2016, Interfax reported Tuesday.
Russia began drafting three-year budgets eight years ago under then-Finance Minister Alexei Kudrin, who led the push for improving the country’s fiscal
planning. Abandoning three-year plans for some time is inevitable in the current situation, state-run RIA Novosti cited Kudrin as saying.