Russia's budget must be balanced amid falling revenues, rising spending needs - deputy PM
MOSCOW. May 12 (Interfax) - The current situation in external markets should not be viewed as an additional source for solving budget tasks; balancing the federal budget for the upcoming three-year period must take into account declining revenues and rising spending needs, Deputy Prime Minister Alexander Novak said.
"The forecast [for socio-economic development] determines budget parameters, but the budget also affects economic growth rates. The government faces the task of balancing the budget amid falling revenues - mainly due to the strong ruble exchange rate and a period of low oil prices - and rising spending needs, including for defense and security. The main task here is prioritizing expenditures, focusing on the most effective areas that yield maximum returns, such as technological leadership projects. Choosing the most cost-effective tools in terms of cost-result ratio," Novak said in an interview with the Vedomosti newspaper.
This work is underway and will continue throughout the budget cycle, Novak said.
Although the current crisis in the Middle East creates prerequisites for growth in export revenues both from oil and gas and from a number of other goods, this effect is not long-term, he said. As a result, the authorities have taken a fairly conservative approach to the forecast for export oil prices - $59 per barrel in 2026 and $50 per barrel in 2027-2029. The effect on the budget from current prices is partially offset through the exchange rate. "Growth in export prices leads to an increase in the positive balance of trade and the current account balance, and this plays into the ruble's strengthening," Novak said.
"The current situation in external markets should not be considered as an additional source for solving budget and macroeconomic tasks," he said.
At the same time, all expenditures related to technological leadership, in addition to having a significant impact on economic growth, will have a strictly disinflationary effect in the long term, he said. "Because they will reduce our dependence on disruptions in external supply chains and increase the supply of high-tech products within the country," he said.
Balancing the budget is also a condition for consistent monetary policy easing, and therefore for expanding opportunities for economic growth, he said. "The more predictable and stable fiscal policy is, the more room there is for reducing inflationary risks and gradually normalizing interest rates," Novak said.
