Russia’s budget is facing substantial risks from any further oil-price
decline as crude is trading at a 12-year low, Prime Minister Dmitry Medvedev
said Friday.
“The dramatic movement of oil prices that we have seen in the past
weeks, especially in the last few days, creates rather serious risks for the
budget,” Medvedev said at a government meeting near Moscow. “A further decline
in oil prices can’t be ruled out.”
The Russian government, which approved its 2016 budget based on oil at
$50 a barrel, now faces a desperate need to raise additional revenue and cut
costs as crude trades near $30 amid a global glut. With oil and natural gas
contributing almost half of budget revenue, the Finance Ministry is
calling for spending cuts equivalent to about 500 billion rubles ($6.4
billion). The country may burn through its $50 billion Reserve Fund -- which
dropped 16 percent last month -- as early as this year if no measures are
taken, Finance Minister Anton Siluanov said Wednesday.
Oil is sliding for a third week on anticipation of Iran exports adding to the supply
glut. The ruble weakened 21 percent against the U.S. dollar in the past three
months, the third-worst performer among 24 emerging-market currencies tracked
by Bloomberg. While crude may fall to any level in the short term, a drop to
below $20 a barrel is unlikely, Russian Energy Minister Alexander Novak told
RBC television, according to the ministry’s Twitter account on Friday.
The spending cuts exclude the military and social services. Competing
priorities are pulling at the government as Russia carries out a bombing
campaign in Syria, its first military foray outside the former Soviet republics
in three decades. The government in October rolled back plans to reduce
the defense program for this year.
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