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Russia needs to adapt the state budget to lower oil prices, Finance Minister Anton Siluanov said Saturday after credit rating agency Moody's Investors Service warned Moscow it might downgrade the country's sovereign debt rating further into junk territory, Reuters reports.
"Moody's assessment indicates the need to adapt the budget system to the new reality in the commodities market," Siluanov said, according to Reuters.
Oil and gas receipts constitute nearly half of the country's revenues, therefore plunging oil prices have knocked down the ruble sharply and now threaten to increase the budget deficit, now envisaged at 3% of GDP in 2016 if oil averages at $40 per barrel, according to a finance ministry forecast.
The country's budget, which still assumes an oil price of an average of $50 per barrel this year, is to be amended next month. The Russian Central bank sees oil at $35 on average this year.
Read also"We have lost": Sberbank of Russia's CEO calls Russia "downshifter state""Given pressures on the government's finances, Moody's sees risks that the government would become overly reliant on a weak currency to offset the lower oil prices or else resort to central bank financing, both of which would keep inflation at relatively high levels and threaten the recovery of the domestic banking system," Moody's said in its statement.
Siluanov said the government was already hard at work on how to mitigate the impact of lower crude.
Read alsoRussia's Gazprom short of money, gets EUR 2 bln loan from Bank of ChinaPlans include expenditure cuts, hikes in excise taxes and further tightening of tax enforcement. But Moody's said this might not be not enough and that more radical reforms to Russia's fiscal regime, such as pension reform, might not happen soon.