Russia Faces Budget Deficit Of 0.9% On Current Oil Prices

Russia Faces Budget Deficit Of 0.9% On Current Oil Prices

  • Russian finance minister Anton Siluanov said the country’s budget could reach 0.9% this year at current oil prices
  • The country’s economy suffered a blow because of slumping oil prices, but even more because of the coronavirus outbreak
  • Russia will spend 600 million roubles from its National Wealth Fund this year

The Minister of Finance of the Russian Federation, Anton Siluanov, said yesterday that the country’s budget deficit could go as high as 0.9% of gross domestic product (GDP) in 2020 on current oil prices.

Russia’s economy saw major harm due to the declining global oil prices, as well as the outbreak of the coronavirus. Siluanov said the epidemic caused more damage to the country’s economy as it made difficulties in transportation, trade, and tourism.

On Saturday, Moscow said school attendance will be optional starting Monday, in efforts to prevent the epidemic from spreading. Also, the country’s Ministry of Education advised all regions to switch to remote learning, if considered necessary. There are still no deaths caused by the virus in Russia, however, some doctors have been questioning these statistics.

According to the initial estimates, Russia anticipated a budget surplus of 0.8% of GDP for this year, but because of current oil and gas prices budget revenues are expected to plummet by nearly 2 trillion roubles ($27.7 billion) compared with earlier estimates, the minister said.

“With the current prices for energy resources, we will have a deficit of up to 1% of GDP. We estimate that it will be at 0.9% of GDP,” said Siluanov, noting that all budget requirements would be fulfilled.

The country has a sovereign wealth fund called the National Wealth Fund (NWF), controlled by the Ministry of Finance, which is composed of oil revenues generated in earlier years. The fund was founded in 2008 and is a part of the country’s sovereign reserves, holding 8.2 trillion roubles ($113.5 billion), translating to 7.3% of Russia’s GDP, as of March 1.

Russia plans to use 600 billion roubles from the fund this year. It will also proceed with the previous plan of using the fund’s money to buy a 50% + 1 share in Sberbank, the largest lender in Russia.

Siluanov also said that the Ministry of Finance trusts oil companies to contribute to the fund this year by investing 500 billion roubles.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.

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