Russia’s Ministry of Finance has unveiled a national budget in hopes to deal with expected gyrations in the international crude oil markets. Learning from lessons during the 2008 financial crisis and boom/bust of crude prices, the government has laid out a plan that expects a drop in Brent Crude to $60 per barrel by 2016, followed by a price averaging $80 until 2030. During those times spending will be cut and the country’s $85 billion sovereign wealth fund can be tapped for necessary spending.
The country’s heavy reliance on oil sales has recently unnerved rating agencies. Currently, the government’s budget is dependent upon $100 oil, and may be why they recently tapped the credit markets to sell $7 billion in 10 year bonds.
Approximately 50% of budget revenue is derived from the sale of oil and gas, which flows through state-owned Gazprom. Recent shale gas discoveries in Europe, where Gazprom supplies a quarter of the gas used, and a non-stop boom in North America threaten the nation’s well-being. As inflation remains high and GDP slows, Russia is bracing for economic pains but seems to be planning accordingly.
Via: floatingpath.com
