New budget rule by Russia is a right move to protect public finance from oil price uncertainties, Mr Abdelhak Senhadji, Deputy director of the Fiscal Affairs Department at the International Monetary Fund, told Armenia News – NEWS.am at the presentation of the IMF Fiscal Monitor, delivered at the IMF Spring meetings in Washington DC.
The latest edition of the Fiscal Monitor (one of the flagship publications of the IMF) shows the considerable fiscal adjustment plans of oil exporters, which need to align their public spending to lower oil prices. Accordingly, the IMF expects their fiscal deficits to curb by around $150 bln in 2016-18.
In line to a new budget rule, Russia is going to limit drawing down fiscal reserves, if the price of Urals oil gets higher than $40 per barrel.
If the price goes beyond $55, the Ministry of Finance may start replenishing those reserves (with further options of keeping or spending).
The country plans to get hold of new public reserves, as it is about to run down its Reserve fund in 2017, and the bulk of the National Wealth Fund in 2019.
Budget stability in Russia determines the incomes of millions of consumers - and their habits of consuming Armenian brandy, fresh and canned fruit and vegetables. In 2016, Armenia exported to Russia totaled $371 mln, rising 51,5% after the slump in 2015. Russia remains the main consumer of finished goods in Armenia.
This budget rule is basically a step in the right direction, Senhadji said.
Former budget policy in Russia did not lead to a fiscal consolidation, needed to adjust to a strong decline in oil prices over the last few years. “The move to a new fiscal framework is the direction”, Senhadji added.