Reduction in oil price in fiscal rule must be accompanied by reduction in spending, otherwise tighter monetary policy may be required - Central Bank of Russia governor

MOSCOW. March 20 (Interfax) - A reduction in the baseline oil price in the fiscal rule should lead to corresponding restrictions on spending to balance the budget, and if this does not happen, tighter monetary policy may be required, Central Bank of Russia Governor Elvira Nabiullina said at a press conference on Friday.

"Another factor that significantly affects the scope for reducing the key rate is fiscal policy. Changes in budget parameters relative to those announced can both increase this scope and narrow it. Here, all parameters matter: the configuration of the fiscal rule, the size of the deficit, including taking into account regional budgets, and the methods of financing it. We have already said that a reduction in the baseline oil price in the fiscal rule should lead to corresponding restrictions on spending to balance the budget. If this happens, we have a disinflationary effect, but if changes in the parameters of the fiscal rule are not accompanied by an adjustment in spending, but only lead to an increase in borrowing, then, all else being equal, this requires tighter monetary policy," Nabiullina said.

The planned adjustment of the parameters of the fiscal rule was previously announced by Finance Minister Anton Siluanov.

"The share of oil and gas revenues [in the structure of budget revenues] is indeed decreasing. We see this situation, and in order to ensure the preservation of the National Welfare Fund's assets, in order to exert less pressure on the foreign exchange market, the Russian government is considering tightening the fiscal rule in terms of lowering the baseline price," Siluanov said.

"This year, we see, this needs to be done quite promptly, and for the upcoming three-year period. I think we will consider and adopt such decisions quite quickly," he said, without specifying the parameters of the planned tightening of the fiscal rule.

A decision was made in 2025 to gradually reduce the cut-off price in the fiscal rule - in steps of $1 per year - from $60 to $55 per barrel by 2030.