Fiscal rule could be changed from 2027, decision to be made before new three-year budget drawn up - Russian Deputy Finance Minister
MOSCOW. March 24 (Interfax) - The Russian Finance Ministry has not proposed changing the oil cut-off price in the fiscal rule within the current year, but suspended foreign currency transactions in order to "balance everything out", and all of the changes being discussed currently relate to medium-term and long-term prospects and are aimed at keeping the federal budget balanced when the oil price is lower, Deputy Finance Minister Vladimir Kolychev told journalists.
In 2025, the government decided to gradually reduce the cut-off price for oil in the fiscal rule by $1 per year, from $60 per barrel to $55 by 2030. In late February, before the military conflict in Iran caused increased volatility on commodity markets, Russian Finance Minister Anton Siluanov said that the Russian government was considering tightening the fiscal rule by lowering the baseline oil price in response to a shortfall in oil and gas revenues. He then said that he expected the corresponding decisions to be made within "a couple of weeks"; however, a new version of the fiscal rule has not been published in the month following on from this. Shortly after Siluanov's statement, the Finance Ministry announced that it would not be conducting transactions for the sale and purchase of foreign currency and gold on the domestic market due to its plans to change the baseline oil price in the fiscal rule.
"In principle, the whole concept of the fiscal rule applies to a year, and not to several months or half a year. In principle, it is for the medium and long term. And if you really think about it, it is actually long term - it is a case of how economic rent is distributed between generations. Therefore, when we talk about the cut-off, we are thinking more about the medium and long term,' Kolychev told journalists, explaining the Finance Ministry's proposals.
"It is not being discussed right now - the current year. The Finance Ministry has no such proposals," he said, asked whether he was referring to changing the cut-off price for this year.
"A change for next year and subsequent years is being discussed currently. At least, that is what the Finance Ministry is proposing," Kolychev said.
He said that the Finance Ministry considered it necessary to balance out the budget with a lower price in the medium term, because it is expected that "the global equilibrium price will probably be lower in the medium and long term than our current parameters".
The Finance Ministry said that the current cut-off price built into the fiscal rule for the medium and long term did not correspond to the principle of a balanced budget.
"But it must be understood that this depends on fiscal reserves - the National Wealth Fund in this case. If they are high, the long-term price built into the rule can be somewhere around the median of forecast long-term prices, but if reserves are few, then, simply based on mathematical logic and common sense, it is better for the price to be in the lower end of the range of possible scenarios, in order to be prepared for these scenarios. Because if you prepare for some median, and then several years on there is a temporary shock all of a sudden, the structure will not stand it, simply because there are no reserves," he said.
Kolychev said that the decision on changing the fiscal rule would be finalized and approved before the new three-year budget is drawn up.
"It's just that the discussions on the budget have begun earlier than usual this year, in order that we can make a more measured decision," he said in order to explain why the necessity of lowering the cut-off price had been announced as early as February.
Asked whether the ministry could propose any other changes to the structure of the budget besides the cut-off price, he said, "We do not see this as necessary."
EXECUTING THE BUDGET
It follows from Kolychev's comments that the prioritization of budget expenditure, which Siluanov announced along with the plans to adjust the fiscal rule, should not be taken to mean budget sequestration.
"During the current year, we always have work ongoing to optimize ineffective expenditure. But this is all inside of the total volume of marginal costs," he said.
"The total volume of marginal costs will not decrease [in 2026]," Kolychev said.
The deputy minister said that the budget was currently being executed just as it usually has been in recent years.
"The seasonality in costs has shifted a little, which happened last year and the year before last. We are moving more or less in accordance with this seasonality. In terms of revenues, everything is within the target, adjusted for oil prices," he said.
Asked whether the Finance Ministry already had an idea of whether changes might need to be made to the current budget's main parameters in the spring session, Kolychev said," No. We have not discussed this yet. There will be a forecast shortly, i.e. amendments, but the overall budget structure is a separate discussion. The amendments will be discussed in April-May, when we have the forecast."
FOREX/GOLD TRANSACTIONS
Kolychev did not comment on the probability of the Finance Ministry resuming the purchase and sale of foreign currency and gold on the domestic currency market in April, these transactions having been suspended in March.
"This is sensitive information for the market and we announce it in press releases. I cannot just come out and say it," he said.
Commenting on why the transactions were suspended in March if there were no plans to change the construction of the fiscal rule for the current year, Kolychev said that this was owing to plans to change it in coming years. "It was necessary to balance everything out well," he said.
