25 Oct 2018 16:10

Russian government approves 2018 budget amendments

MOSCOW. Oct 25 (Interfax) - The Russian government has approved 2018 budget amendments and submitted them to the State Duma, a government spokesman told reporters.

The draft amendments, approved at a government meeting on Thursday, increase the projected budget surplus in 2018 more than fourfold to 2.139 trillion rubles, up from 481.74 billion rubles previously.

The forecast GDP volume used in drawing up the budget will be increased to 101.164 trillion rubles from 98.234 trillion rubles previously. In other words, the surplus will come to 2.1% of GDP, compared with 0.5% of GDP following the spring budget amendments and a deficit of 1.3% initially.

The inflation assumption in the budget will change to 3.4% from 2.8%.

Budget revenue will increase to 18.942 trillion rubles from 17.073 trillion rubles, with oil and gas revenue increasing by 1.582 trillion rubles to 8.818 trillion rubles. Baseline oil and gas revenue, calculating using the baseline price of oil ($40.8 per barrel) will rise by 228.7 billion rubles to 4.723 billion rubles and excess oil and gas revenue (allocated to the National Welfare Fund (NWF)) will increase by 1.353 trillion rubles to 4.093 trillion rubles.

The higher price of Urals grade crude oil will boost oil and gas revenue by 1.1 trillion rubles. Changes in the ruble/dollar exchange rate will provide an additional 319.3 billion rubles and increased oil, gas condensate and natural gas production volumes will contribute an additional 44.277 billion rubles. While changes in export volumes of oil, oil products and gas will contribute 36.4 billion rubles.

Non-oil and gas revenue will rise by 286.8 billion rubles.

The non-oil and gas deficit will total 6.678 trillion rubles or 6.6% of GDP compared with 6.9% projected previously.

The NWF will amount to 3.818 trillion rubles as of the end of 2018. Excess oil and gas revenue in the current year will be transferred to the NWF in 2019.

Budget spending will increase by 212 billion rubles to 16.803 trillion rubles from 16.591 trillion rubles.

The overall redistribution of resources with the budget will total 340 billion rubles, including 131.73 billion rubles of economized resources, notably from social payments and compensatory funds in connection with refinements to the number of recipients (37.471 billion rubles), budget allocation reserved for changes potential ruble weakening (14.508 billion rubles), and savings in connection with lower debt servicing costs (10 billion rubles).

Plans are to allocate 93 billion rubles to compensate the regions for lost revenue from cancellation of the tax on movable property, First Deputy Prime Minister and Finance Minister Anton Siluanov said. In addition, 30 billion rubles will be allocated to support industrial sectors. Promsvyazbank , Russian Agricultural Bank (RusAg) and Vnesheconombank (VEB) will receive additional support from the budget amounting to respectively 20 billion rubles, 20 billion rubles and 25.451 billion rubles. The Dom.RF company will receive 7.8 billion rubles in recapitalization, that will go to settle claims by individual homeowners against property developer SU-155. Also, the asset contribution to the Fund to Protect the Rights of Citizens - Participants in Shared-Equity Construction will increase by 5 billion rubles.

The ceiling for sovereign domestic debt as of January 1, 2019 will be lowered to 9.821 trillion rubles from 10.281 trillion rubles previously.

Net borrowing on the domestic market in 2018 will be reduced to 661.77 billion rubles from 1.044 trillion rubles under the spring budget amendments (which had raised net borrowing from 817.042 billion rubles initially). The planned redemption volume of ruble-denominated securities will be reduced to 531.09 billion rubles from 631.09 billion rubles, reflecting the Finance Ministry's decision not to exchange 100 billion rubles in OFZ this year. In other words, gross borrowing will amount to 1.193 trillion rubles instead of 1.675 trillion rubles.

The amendments also exclude the possibility of exchanging existing Eurobond issues for new ones. The budget authorized a total of $7 billion in borrowing on the external debt market in 2018, of which $4 billion would be used to purchase Eurobonds in circulation in the framework of an exchange.

Instead, the amendments reduce the amount of money that can be used to buy back Eurobonds to $3.2 billion, that is, the amount that Russia has already spent for the purpose this year. In other words, Russia will not buy any more Eurobonds this year.

However, the possibility of placing another $2.2 billion in sovereign Eurobonds on the market will remain in the budget.

The ceiling on sovereign external debt as of January 1, 2019 will be reduced to $61.7 billion (52.3 billion euro) from $61.9 billion (49.5 billion euro).