Russia’s Finance Ministry assessed the mechanism of the budget rule

Russia’s Finance Ministry is content with the mechanism of the budget rule, the ruble rate has become less sensitive to the oil price dynamics, Deputy Minister Vladimir Kolychev said at the Moscow Financial Forum on Friday.

“We are on the whole satisfied, we see that the ruble rate’s sensitivity to dynamics of oil prices has seriously decreased, was even negative in some moments, there are many factors there,” he said.

“There is a problem connected with defining the volume of operations on the foreign exchange market and the fact that the current mechanism can be procyclical with respect to capital flows, there will be no more of this procedure from next year. Correspondingly, the rule will change in that part that the budget rate for volume definitions of operations on the foreign exchange market will no longer have impact,” he said.

The ministry said earlier it will buy foreign currency on the market allotting additional oil and gas revenues for the purpose if the oil price exceeds the U.S. $40 per barrel level put into the budget and will sell currency if the oil price is lower. Starting with 2018 a new budget rule will come into force, under which additional oil and gas revenues received from the oil price above the established level will be allotted not to expenditures, but to reserves.