The Ministry of Finance has developed a new budget rule that will allow the ruble to collapse to the level of 65–75 rubles per dollar and stabilize the situation on the foreign exchange market. Vedomosti writes about this, citing sources close to the government and interviewed experts.
The publication outlined new parameters of the budget rule: it is proposed to set the cut-off price at $60 per barrel, and add an additional parameter – to fix the minimum oil production at 9.5 million barrels per day. The cut-off price is used to distribute cash flows by the Ministry of Finance, all oil and gas budget revenues received at a price of energy resources above the cut-off price go to the National Welfare Fund (NWF). All income below is used to cover current expenses.
The Ministry of Economic Development, as well as experts interviewed by the publication, note that the adoption of a new budget rule will significantly affect budget spending – they will have to be significantly reduced. However, the fall of the Russian currency will reduce production and the number of exporting companies that suffer from the extremely strong ruble exchange rate. According to Stanislav Murashov, macroanalyst at Raiffeisenbank, the new budget rule will make it possible to strengthen the foreign currency by 10-20 rubles, while the expert estimates the costs for these tasks at about 2.5-4.5 trillion rubles a year (the total volume of budget expenditures for 2022 is estimated 23.7 trillion rubles).
Viktor Tunev, chief analyst at Ingosstrakh Investments Management Company, believes that the Ministry of Finance expects to lower the ruble exchange rate to about 77 rubles per dollar – in any case, this is indicated by the agency's forecast for basic budget revenues (around 7.5 trillion rubles). However, he notes that if the ruble fails to collapse and the exchange rate remains in the range of 50-60 rubles, the budget's oil and gas revenues will simply not be enough to carry out foreign exchange interventions. The head of the Ministry of Economic Development, Maxim Reshetnikov, also hinted at this earlier: according to him, it is very difficult to estimate the volume of necessary interventions, and the potential effect is not obvious – there is a risk of causing additional damage to the economy if budget spending is redistributed in favor of foreign exchange interventions.
A too strong ruble costs the Russian budget dearly: the strengthening of the national currency for each ruble against the main foreign currencies causes damage to the budget by about 130-200 billion rubles. The country's key export industries are suffering from a strong ruble: energy, metallurgy, fertilizer production and the chemical industry. The Russian authorities cannot conduct direct foreign exchange interventions (buying dollars and euros on the stock exchange) because of the risks of sanctions, so the authorities are considering the possibility of indirect interventions – through the currencies of “friendly countries”. First of all, it was about the Chinese yuan, which, among other things, spurred the volume of trading in Chinese currency on the Moscow Exchange.
The cut-off price for oil in the region of $60 per barrel may also be related to the desire of the United States and Western countries to introduce a cap price mechanism for Russian oil, which is currently considered in the range of $40 to $60 per barrel. Western countries intend to impose a "cost ceiling" on Russian oil by putting pressure on the tanker insurance sector, which is almost entirely controlled by US, British and European companies.