Realistic macro forecast reduces risk of deficit spiralling, NWF enough regardless - Russia's MinFin official
MOSCOW. Jan 21 (Interfax) - The situation with Russia's oil and gas revenues at the end of last year and beginning of this one shows that the decision to gradually lower the cut-off price in the fiscal rule was timely, Deputy Finance Minister Vladimir Kolychev said.
The Finance Ministry does not currently see any need to further review the budget structure and this issue may only be discussed if reasons arise to believe that the equilibrium price in the medium term will lower than the planned cut-off price.
"The start of the year turned out interesting, and the end of last year also. Oil prices, indeed, are significantly lower than our base cut-offs. And in principle this indicates that the government made the decision in time that we need to gradually lower the cut-off," Kolychev told reporters.
However, the Finance Ministry assumes that the liquid assets accumulated in the National Welfare Fund (NWF) are "sufficient for significant risks," he said. Finance Ministry data show that the fund's liquid assets stood at the equivalent of 4.085 trillion rubles or $52.22 billion (1.9% of GDP forecast for 2025).
"If the situation develops somehow differently, according to an even more conservative scenario than we anticipate, some additional discussion of the budget structure might be required," Kolychev said, adding that this does not refer to what the oil price is at a given moment, but to what extent the equilibrium price in the medium term deviates downward from the currently planned cut-off price of $55 per barrel by 2030.
"This is a question of where the equilibrium price might be, because where the oil price is now is not that important if in a few months it approximately corresponds to our understanding factored into the budget structure. This is more a question of the medium-term price, for the next three to five years," Kolychev said.
"At this point, since the factors that influenced the price of oil at the end of last year and beginning of this year will to a large degree - at least it seems that way right now - not have a long-term effect, a need to review the budget structure does not arise. But if our assessments change and we realize that the equilibrium is nonetheless falling far below our $55 that are foreseen by 2030, this issue will need to be discussed," he said.
Asked if the government might consider accelerating the reduction of the cut-off price if this turns out to be the case, he said "Yes, by and large, yes."
The government decided last year 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.
Kolychev said base oil and gas revenues are important for the budget structure. Last year these revenues slightly exceeded the target, so 84 billion rubles will be added to the NWF this year as a result, he said.
"The fact that forecasts changed in the course of the year is normal, since the oil price itself is mobile, forecasts move along with it, and this is no big deal. Actually, this is why the fiscal rule was conceived, in order to offset this mobility's effect on the economy," Kolychev said.
Deficit not expected to spiral again
Asked if Russia might keep the budget deficit from ballooning in the course of the year as it did in 2025 if it adheres to the fiscal rule, Kolychev said "This is specifically what we're counting on." Russia's budget law for 2025 targeted a deficit of 1.173 trillion rubles or 0.5% of GDP, but amendments made in the spring raised it to 3.792 trillion rubles or 1.7% of GDP and changes in the fall increased it further to 5.737 trillion rubles or 2.6% of GDP.
"Since you draw an analogy with last year, I'll say a couple of words about it. Last year our main operating guideline was not, after all, the total deficit, because it depends on the price of oil and if we're talking about how stable the budget structure is only based on whether we guessed the price point for oil or not, this is not a very good management mechanism. In other words, we're talking about the structural deficit, the one with base revenues and base prices for oil. Initially we anticipated it would be zero last year, but it turned out to be 1.2%. In principle, by the fall, when we made the changes, we'd already reassessed the revenue base and mainly in non-oil and gas revenues. Expenditures were not increased, so we held the line on spending, but non-oil and gas revenues were lower due to the cooling of the economy and a structural imbalance of 1.2% formed," Kolychev said.
He said that situation was due in part to the fact that the budget initially drafted in the fall of 2024 was based on one set of inflation and economic growth figures, but the reality turned out differently, "largely due to the cooling of the economy." This led to the loss of non-oil and gas revenues.
When the budget was drafted for 2026, the macroeconomic forecast did not factor in an optimistic scenario from the start, he said.
"We have a realistic scenario there. When we were discussing the scenario, both the government and Bank of Russia agreed that it's fairly realistic, so we see fewer risks in it. Accordingly, we far less expect a situation where we significantly fall short in non-oil and gas revenues, as was the case in 2025 and became the main reason that we had to expand the structural deficit," Kolychev said.
An advisor to the governor of the Central Bank, Kirill Tremasov said earlier that the planned return to a zero structural budget deficit in 2026 would be a powerful disinflationary factor that would expand room for the bank to cut its key interest rate.
"The government is supposed to return to the framework of the fiscal rule, the framework of a zero structural deficit next year. If this happens, it will, of course, be a substantial disinflationary factor and this will expand room for the reduction of the key rate, the easing of monetary policy," Tremasov said.
Borrowing
The Finance Ministry also expects that more stable non-oil and gas revenues than last year will enable it to avoid increasing the planned amount of domestic government borrowing as was forced to do in 2025.
"Since we assume that the non-oil and gas part will be more stable than last year - a realistic conservative forecast is factored in and legalization measures are being taken in regard to turnover taxes and so on - we believe that we won't need to use additional borrowing and expand the program," Kolychev said.
Budget amendments made last fall increased borrowing for 2025 by 2.2 trillion rubles due to the growth of the deficit. The Finance Ministry raised the lion's share of this in one auction day in November, which set a record with the placement of two floating rate OFZ federal bonds. The ministry is trying to reduce the share of such bonds in its debt portfolio.
