Russia's three-year budget drafted based on $40 per barrel

The draft budget for 2017-2019 assumes sanctions against Russia will continue until 2019 year-end and the oil price of $40, the Russian Prime Minister Dmitry Medvedev said. The draft will be submitted to the State Duma before October 28.

"We assume the conservative estimate of the economic situation on global markets and fairly low oil prices - within $40 per barrel of Urals throughout all the three years, and that sanctions may remain until the end of the forecast period," the prime minister said. 

Such developments are possible if a decision is taken to boost budget expenditures in case of realized oil prices growth scenario, the Finance Ministry adds. 

"The stabilization of oil prices over the long term at the level of $40-50 per barrel in real terms is seen as a most probable scenario," TASS cited him as saying.

The Russian government should ensure stability of the tax system and its high attractiveness for business: "As part of our tax policy we should ensure stability of the tax system and to raise its attractiveness for investors," Medvedev said.

Medvedev stressed that it is crucial to "strengthen all those positive changes that the government has made this year to expand the potential of the economy in rather difficult conditions."

The figure of $40 per barrel was chosen based on the current situation and forecasts of financial experts, therefore, the Russian government is ready to build a budget based on even such pessimistic numbers, a professor of the RANEPA Chair of Economics and Finance of the Public Sector, Lyudmila Pronina, told Vestnik Kavkaza.

The expert reminded that the head of the Central Bank Elvira Nabiullina, speaking at a session of the United Russia party last week, drew attention to the financial and economic tools of the country's government, which will help the Russian economy to survive even $25 per barrel. "In general terms, it is the suppression of inflation, work with the key rate, the reduction and stabilization of the budgetary expenditures at the level of the federal budget," Pronina explained.

"We should look at inflation. The stabilization of incomes and expenses on the basis of the new budget rule, which the Finance Ministry intends to implement until 2020, will also play it role," Pronina noted.

According to her, we also should not forget about the geopolitical factor, since the sanctions "provide a very strong influence on our economy, including the formation of the budget."
In case, if the oil price will be higher than the drafted one, the excess will go to the budget reserve funds, a professor of the RANEPA Chair of Economics and Finance of the Public Sector explained.