The Ministry of Finance has proposed to introduce a new fiscal rule

The main fiscal rule, proposed by the Ministry of Finance in the draft budget policy guidelines submitted to the government for discussion and work with 2020 and will be based on the base oil price of $40 per barrel. His choice of the Ministry of Finance explains that the assessment of long-term oil prices change, and the rest of the country the reserves are small. About this “Vedomosti” acquainted with the text of the document.

On the basis of the price of oil will be calculated and the base rate of the ruble to the budget. Marginal costs will be calculated according to the rule: the basic income plus the cost of servicing the debt. Received in excess of this amount will be allocated to reserves.

To bring costs to the necessary level will not immediately, so long as the deficit will decline from 3% to the target level of 1.2%, the Finance Ministry proposes to use the transitional variant of the budget rules.

It lies in the fact that the marginal costs of the budget should be determined as the sum of oil and gas (5.5% of GDP when the price of oil to $40 per barrel) non-oil and gas (about 9.6% of GDP) revenue, decreasing the deficit, spending on the recapitalization of the web and interest expense on the debt. The Finance Ministry said that additional revenues should be directed into the reserve, since their spending will lead to the fact that the Central Bank will keep rates high.

Since 2020, the budget rule must determine the approach not only to costs but also to debt. The Finance Ministry proposes to limit the borrowing and use of reserves by means of two “keys”. The first is the size of the debt service costs should not exceed 0.8–1% of GDP per year; second — in case of need in loans because of a shortage non-oil revenues or the lack of sources of financing of the budget additional loans shall not exceed the shortfall of non-oil revenues.

About the Finance Ministry’s proposal to introduce a new fiscal rule “Vedomosti” wrote in February. Then the Deputy head of Department Maxim Oreshkin called this as “the only effective way to isolate the volatility of the real exchange rate from the fluctuations in oil prices”.

However, when submitted to the government the project of the Ministry of Finance stated that the measures to reduce costs can be volatile, if not broad public support. International experience shows that to find a consensus in terms of reducing social spending possible, but, as pointed out by the Ministry of Finance, this requires a new social contract.