“2016 is the last year when we are able to spend our reserves [this] way” – Russian finance minister
Russia’s Ministry of Finance released a draft budget for 2016, which relies heavily on the country’s sovereign fund to bridge its growing deficit gap. According to Russia’s Finance Minister Anton Siluanov, the country’s sovereign fund will no longer be able to serve as the main source to finance the budget deficit following 2016, reports TASS.
“Our reserves volume [in 2015] will decrease by approximately 2.6 trillion rubles ($40.85 billion) – more than half. This means that 2016 is the last year when we are able to spend our reserves that way. After that we will not have such resources,” he said.
According to the 2016 draft federal budget published by Russia’s Finance Ministry, the federal budget revenues will amount to 13.58 trillion rubles ($217 billion), while expenses will equal 15.76 trillion rubles ($252 billion), leading to a budget deficit of 2.18 trillion rubles ($34.9 billion), 2.8% of GDP. The document implies forecasted GDP at 78.67 trillion rubles ($1.26 trillion) with inflation not exceeding 6.4%.
The main source of Russia’s growing deficit is the continued low price environment for oil. 50% of the federal budget, 70% of export revenues, and 25% of the country’s total GDP comes from energy exports. With the continued depression of oil prices, Russia has been forced to draw from its sovereign wealth fund in order to pick up the slack.
According to the minister the Russian budget will lack 900 billion rubles ($14.5 billion) in 2016 if oil prices and dollar exchange rate remain unchanged.
“If the current oil prices and exchange rates remain the same, and the current oil price is at around $44 per barrel for Urals, and the ruble exchange rate is about 62 rubles to the dollar, we can fall 900 billion rubles short. We really face such risks,” the minister said.
The draft budget for 2016 is based on the forecast of the average annual oil price at $50 per barrel and the average annual exchange rate at the level of 63.3 rubles per dollar.
The 2016 draft budget has several fundamental changes from budgets previously proposed by the ministry of finance. Firstly, it is a single-year budget, excluding forecasts for 2017 and 2018. It also revokes the traditional rule on maximum expenditures based on oil prices, usually calculated on the basis of income under oil settling prices plus 1% of GDP, with the settlement price being calculated as the average over the past three years if oil prices fall. The budget was also submitted to the State Duma (Russia’s lower house of parliament) on October 25 instead of the usual date October 1.