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In response to declining oil revenues and mounting fiscal pressures, Russia is contemplating a revision of its budgetary framework, specifically the oil price benchmark that dictates the accumulation of reserves in the National Wealth Fund (NWF).
Finance Minister Anton Siluanov has reopened discussions on adjusting the current $60 per barrel cut-off price used in the country’s oil-based budget rule. This rule mandates the Finance Ministry to buy or sell foreign currency from the NWF based on fluctuations in oil and gas revenues. While Siluanov had previously ruled out changes for the upcoming three-year budget, he now suggests re-evaluating the price level during medium-term budget planning to ensure the preservation and replenishment of the NWF.
The NWF, Russia’s sovereign wealth fund, has seen its liquid assets decline sharply—from $112.7 billion to $40.4 billion—since the onset of the Ukraine conflict in February 2022. This depletion is attributed to increased defense spending and support for state entities. The drop in Brent and Urals crude oil prices has exacerbated financial pressures.
Adjusting the cut-off price could bolster savings by accumulating more petrodollars; however, it would necessitate lower spending, a challenging proposition amidst escalating war expenditures.
For further details, refer to the original reporting by Reuters: Russian finance minister returns to idea of adjusting oil price budget rule.
