The Central Bank criticized the budget rule developed by the Ministry of Finance

According to analysts of the Central Bank (CB), the base price of oil and the volume of oil production presented by the Ministry of Finance in the new modification of the budget rule are overstated. However, according to the regulator, the use of a base oil price of $40 per barrel in 2017 prices (compared to $60 in the new budget rule) until the beginning of 2022 also seemed “somewhat conservative.”

“Based on the expected dynamics of the price of profitability of shale producers and the price of oil, which balances the state budgets of the main oil exporting countries, the price of Urals oil at $60 per barrel seems to be significantly higher than the equilibrium level for the medium and long term. We see similar, although noticeably lower, risks in terms of oil production if it is fixed at the level of 9.5 million barrels per day,” commented in the analytical note Central Bank “”Modification of the budget rule: from conservatism to softness” parameters of the budget rule.

Despite the fact that the indicator of $40 per barrel in the previous configuration of the budget rule is considered by the Central Bank to be “conservative” in the current conditions, analysts consider its preservation as a “more rational option”. “An alternative option could be to maintain the current mechanism, within which the volume of oil production is not fixed for the calculation of basic oil and gas revenues,” the note explains.

In June, Finance Minister Anton Siluanov clarifiedthat the new modification of the budget rule provides for a transition to a looser budget policy and “greater flexibility”. If earlier there was a cut-off price as a condition for the formation of oil and gas revenues, now, when, in addition to the price of oil, the volumes of oil and gas supplies are important, we have made the dependence of budget revenues not only on price, but also on various options for the volume of production and export of hydrocarbons,” commented minister. Also, if the authorities approve the parameters of the new budget rule, the Ministry of Finance may resume foreign exchange intervention, media reported.

About the new budget rule – in the material “Kommersant FM” “The budget was painted according to all the rules”.

Andrey Sapozhnikov