Page 10 - RusRPTNov21

Falling oil revenues in the future
Despite the favorable official forecast of the government, the Ministry of Finance is alarmed by the negative outlook for oil demand. "If the announced intentions of a number of countries to achieve carbon neutrality by 2050 (in China - by 2060) acquire legislative status and other countries follow this example, then the demand for oil will drop catastrophically," the ministry said in the Guidelines for Fiscal Policy until 2024 of the year".
The document provides a forecast of the International Energy Agency (IEA), according to which oil prices will fall to $35 per barrel by 2030 and will slowly decline to $25 per barrel by 2050 (in 2020 prices).
To maintain economic and budgetary stability, the Ministry of Finance proposes to save more money and start doing it now: to raise the threshold of liquid reserves of the National Welfare Fund (NWF) from 7 to 10% of GDP, beyond which funds can be invested within Russia. Thus, the amount of "inviolable" reserves that cannot be spent will increase significantly. Vladimir Putin has already instructed the government to consider the initiative of the Ministry of Finance by October 15.
This proposal already contains a significant exception at the entrance: regardless of the established threshold, NWF funds can be invested in infrastructure projects from a special list, which will be approved after October 1, 2021. But such investments will have a limit of up to RUB2.5 trillion. The latter, as the Ministry of Finance explains, will allow minimizing the risks of reduced funding for selected projects and, in general, will reduce budgetary risks.
However, according to the Ministry of Finance, even taking into account the financing of infrastructure projects in the amount of RUB2.5 trillion, the volume of the NWF at the end of 2024 may amount to 15.4% of GDP.
In May, RBC sources said that the government had already pre-selected seven projects that would receive a total of almost RUB900bn from the NWF. Among them - the development of the Russian Railways of the eastern part of the BAM to ensure the export of coal from Yakutia; development of the railway infrastructure of the Central Transport Hub, including the Moscow Central Diameters; construction of the M-12 highway Moscow - Nizhny Novgorod - Kazan.
Main items of expenditure
From 2022, the government is returning to the usual parameters of the "budget rule", which was suspended in 2020 due to anti-crisis spending due to the pandemic.
This means that all oil and gas budget revenues received when oil prices are above the established threshold ($44.2 per barrel in 2022, $45 in 2023 and $45.9 in 2024) are sent to the reserves of the NWF. The structural primary budget deficit (at base oil prices) is capped at 0.5% of GDP.
10 RUSSIA Country Report November 2021 www.intellinews.com