On Friday, Minister of Finance Anton Siluanov announced amendments to the 2013 federal budget in light of the Ministry for the Economy’s revised macro forecasts, lower non oil & gas revenues and other changes.
The key budget indicators (volumes of revenues and expenditures) are to be kept unchanged.
RUB 166bn (RUB 42bn from the unfrozen antirecessionary standby stockpile and RUB 124bn from spare resources within the budget (rest of the money on the State Pension Fund balance; lower debt services payments; CPI-linked social obligations)) are to be reallocated to preschool education, agricultural support, Olympic games, etc.
Based on the higher oil price estimate, MinFin hiked its oil & gas revenues. However, as it decided to offset lower than previously planned privatisation revenues (RUB 60bn vs. RUB 427bn) by additional oil & gas revenues, the Reserve Fund is to receive only RUB 149bn (vs. RUB 373bn stated in the original law).
The preliminary schedule implies that final amendments will be delivered to the Duma on 7 May, with the parliament to adopt them by 5 June.
The crucial thing over the budget changes is whether or not they break the budget rule. Top officials (including the President and the Prime Minister) and MinEconomy have been advocating for the budget rule. It is worth noting that although a narrow interpretation of the budget rule might assume that a smaller replenishment of the Reserve Fund breaches the rule, sub-section 8 of article 96.9 of the Fiscal Code says that Reserve Fund may be used to repay debt early. This, coupled with Siluanov’s comments that additional amendments coincide with the fiscal rule, underpins the idea that the budget rule remains undamaged.
The smaller than previously expected transfer to the Reserve Fund means that if MinFin starts operations on the FX market, purchases of foreign currency would be smaller than expected. Moreover, assuming the placement of Eurobonds, MinFin might scale its FX purchases this year down to zero.