Russia’s prime minister is not betting on a rebound in oil prices this year. From Moscow Times (hat tip reader Nivethan):
Prime Minister Vladimir Putin on Monday ordered changes to this year’s federal budget to take into account the sharp drop in global oil prices, a decision that could pave the way for further spending of the Reserve Fund.
The Finance Ministry must base the budget on the price of $41 per barrel, or less than half of the $95-per-barrel estimate that is a cornerstone of the existing budget…A Finance Ministry spokesman said the prices were for Russia’s main Urals blend…The Urals price averaged $42.90 in the first 16 days of this month, Economic Development Minister Elvira Nabiullina said…
The Kremlin’s top economic adviser, Arkady Dvorkovich, said in an interview published Monday that the government expected a budget deficit of at least 5 percent of the year’s gross domestic product….
The budget deficit could range from 5 percent to 7 percent of GDP, said Yelena Lebedinskaya, a budget analyst at the Economic Expert Group, a think tank….
The government will finance most of the deficit by dipping further into the Reserve Fund that has been sponging windfall oil and gas revenues since 2003, Lebedinskaya said. The fund held 4 trillion rubles as of Jan. 1, or $137 billion, the Finance Ministry reported last week.
“There will be borrowings, but they won’t be large,” she said.
Some of the Reserve Fund has already been slated for spending. In November, Kudrin announced that the government would spend 1 trillion rubles this year from the financial safety cushion as a result of the global economic crisis…
She added that Russia’s relatively low sovereign debt allowed the government to indulge in borrowing on the market despite the high cost of doing so in an economic crisis that sent the rates soaring