Sergey Drobyshevsky: "Changing the cut-off price for oil will not have a significant impact on the ruble exchange rate"

"Undoubtedly, the fiscal rule, on the one hand, should correspond to the situation and characteristics of the economy, which change over time, especially in the context of various shocks, and, on the other hand, should remain unchanged in order to ensure stabilization of budget revenues over a long period of time. Obviously, the Russian economy has changed quite a lot over the period from 2022, and I believe that the discussion of possible modifications of the fiscal rule is quite appropriate.

In my opinion, the key issue now should be whether the fiscal rule should remain linked to the oil price or be based on some other principles. Given the declining role of the oil and gas sector in the Russian economy, especially gas and oil exports, I believe that the new fiscal rule should be linked to the determination of the structural level of federal budget revenues, i.e. the level of federal budget revenues that corresponds to long-term sustainable rates of economic growth, and all deviations of revenues from this level — regardless of whether they are related to fluctuations in the oil price or not or, for example, with overheating or recession of the economy — refers to market revenues, and either to be directed to the National Welfare Fund or compensated from it. Of course, a separate task is the allocation of the structural level of revenues, which requires discussion with the participation of the entire economic bloc of the Government and the Bank of Russia.

In the current situation, revising only the base level of oil prices and maintaining the current structure of the fiscal rule will not have a strong impact on the marginal volume of federal budget expenditures, as oil and gas revenues are no longer the main item of budget revenues, and non-oil and gas revenues continue to grow in nominal terms. Therefore, I would not consider even a slight decrease in total budget expenditures as the beginning of a new wave of budget consolidation, while the cessation of growth of the federal budget as a share of GDP and its stabilization are already stipulated in the budget for 2025–2027.

With regard to the dollar/ruble exchange rate, I would not link a possible change in the benchmark oil price and downside risks to the ruble exchange rate, as in any case changes in the parameters of the fiscal rule and federal budget parameters are not a quick process compared to what is happening in the currency market. Given the narrowing of the hard currency market in the Russian Federation after the introduction of sanctions against Moscow Exchange and National Settlement Depository, dollar pricing is strongly impacted by one-off transactions and the behavior of individual major participants, these fluctuations may be stronger than the potential effects of a change in the policy of the Russian Ministry of Finance within the framework of following the fiscal rule," the expert noted.

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