INSUBCONTINENT EXCLUSIVE:
Russian authorities are considering forced cuts to federal spending as falling oil prices deplete the reserves needed to fund the war in
Ukraine, Bloomberg reported Tuesday, citing an anonymous source familiar with the preliminary discussions.The government is reportedly
exploring a revision to its so-called budget rule, the mechanism that dictates how funds from the National Wealth Fund (NWF) are spent.Under
the current framework, the Finance Ministry taps the NWF to cover shortfalls in oil and gas revenue when the price of Urals crude drops
According to Bloomberg's source, this threshold could be lowered to $50 from next year if oil prices stay low.However, this change would
mean reduced access to the NWF, forcing the government to slash spending in other areas.Russia's 2025 draft budget had assumed an average
It averaged just $54 in April and fell further to $49 in early May.As a result, tax revenues from raw materials in the first quarter came in
Finance Ministry revised its budget projections to expect oil and gas revenues falling 2.6 trillion rubles ($32 billion) short
threshold to $50 could require spending cuts of 1.5 trillion to 1.6 trillion rubles ($18.4 billion to $19.7 billion), according to Natalia
Orlova, chief economist at Alfa Bank
Any decision to curb spending, she warned, would be painful for budget recipients."Geopolitical priorities still take precedence," she
noted.A central challenge is military spending.This year, the Russian government is expected to allocate roughly 30% of the national budget,
expenditures are unlikely to face cuts
Civilian programs, many of which have already had funding reduced, are more likely to bear the brunt, said Dmitry Polevoy, chief investment
assets to plug budget gaps and prop up state corporations
The fund had just $39.5 billion in liquid assets in April, the lowest level since the fund was created in 2008.Without changes to the budget
rule, the Finance Ministry is expected to spend at least 800 billion rubles ($9.8 billion) from the NWF this year to offset lost oil
Another 1 trillion rubles ($12.3 billion) is spent annually on infrastructure megaprojects and support for state-owned companies.Analysts at
if prices drop to $40.The growing pressure on state finances is likely to increase the risk of new non-oil tax hikes, Polevoy warned.
