Lowering cutoff price will make it possible to replenish liquid part of NWF throughout entire upcoming 3-year period - CBR
MOSCOW. Sept 30 (Interfax) - The Russian Finance Ministry expects the National Wealth Fund (NWF) to be replenished throughout the entire medium-term period, according to the updated version of the Central Bank of Russia's draft monetary policy guidelines for 2027-2029.
"Lowering the base price will increase the resilience of budget policy to changes in external conditions and will help maintain sufficient liquid funds of the NWF. According to the estimate of the Russian Finance Ministry, the liquid part of the NWF will be replenished throughout the entire medium-term period," the document said.
Initially, the 2026-2028 budget law did not provide for any replenishment of the National Wealth Fund (NWF) in 2027 based on 2026 results; the projected change in the fund's volume by year-end, rising to 13.837 trillion rubles from 13.66 trillion rubles at the start of the year, was attributed solely to exchange rate fluctuations, estimated at 176.9 billion rubles. However, in June, Finance Minister Anton Siluanov said that the fund could be replenished by 1 trillion rubles based on 2026 results provided market conditions remained unchanged. Later, in September, he estimated the potential replenishment at between 600 billion and 1 trillion rubles. For 2028, the fund was expected to grow by 342.1 billion rubles, an amount corresponding to the additional oil and gas revenues generated in the preceding year.
The CBR notes that the new budget projections entail adjustments to the parameters of the fiscal rule and a gradual reduction of the structural primary deficit to zero by 2029. The government proposes adjusting the baseline oil price trajectory within the fiscal rule, lowering it to $50 per barrel starting in 2027 and maintaining it at that level through 2029.
"A lower baseline price will reduce the volume of oil and gas revenues factored into the determination of the expenditure ceiling. According to Ministry of Finance estimates, the share of baseline oil and gas revenues in GDP could decrease by 0.4-0.5 percentage points as a result of the baseline price revision. At the same time, federal budget expenditures in nominal terms will continue to rise over the next three years. Their financing will rely, among other sources, on a volume of non-oil and gas revenues that exceeds last year's projections," according to the draft.
Additional revenues are expected from expanding the tax base under the progressive personal income tax scale, the introduction of a tax on windfall profits in the extractive sector resulting from favorable external market conditions, and increased import levies Among other factors, according to the draft.
The draft also notes that a structural primary deficit should persist through 2026-2028 despite the increase in non-oil and gas revenues. According to new budget projections, it could gradually narrow to 0.6% in 2027 and 0.2% in 2028, and then zero out in 2029, while maintaining the lower baseline oil price within the fiscal rule.
