It is Highly Likely that the Budget will Be Balanced on the Basis of the Results of the Year

Firstly, it is to be specified that a depreciation of oil prices may seriously affect federal budget revenues if it is a protracted one. In addition to the above, the 2014 plan on federal budget revenues will fail only if the average annual Ural oil price falls below $101 a barrel (it is the level on which basis the federal budget was initially drawn). In January-July, oil prices markedly exceeded that index and remained within the range of $105–$109 a barrel. So, even if during the remaining four months oil prices happen to be below $100 a barrel, the average annual price will not be below the forecast, anyway.

Secondly, depreciation of oil prices is accompanied by depreciation of the ruble exchange rate which situation can partially neutralize the effect related to depreciation of oil prices as in calculation of tax rates both oil prices and the RUR/USD exchange rate are taken into account. In fact, the ruble equivalent of the price on oil may even grow, rather than fall.

Thirdly, the current parameters of the federal budget provide for a surplus of 0.4% of GDP. It is to be noted that calculations based on the dynamics of tax revenues within seven months of 2014 point to the fact that that surplus could grow to 0.9% of GDP (with the expenditure plan remaining unchanged).

So, the situation with execution of the federal budget is far from being a critical one and even a decrease in the revenues as compared to the initial plan may not result in a budget deficit. It is highly likely that on the basis of the results of 2014 the federal budget will be a balanced one.

Arseny Mamedov, Head of the Budget Policy Department