Russia cenbank hopes for quick decision on restoring ‘budget rule’

(Reuters) – The Russian central bank hopes authorities will make a decision on reintroducing the country’s “budget rule” in the near future, Deputy Governor Alexei Zabotkin said on Friday.

The budget, or fiscal, rule, which caps Russia’s budget spending, linking it to its non-oil and gas revenues and channels extra oil and gas revenues into its rainy-day fund, has been suspended to help Moscow tackle the coronavirus pandemic.

President Vladimir Putin ordered the government earlier this month to draw up new rules by the end of July to boost growth and help protect the economy from a serious downturn.

“We support the general logic and very much expect that the final decisions on the budget rule will be made in the near future as part of the preparation of the three-year budget,” Zabotkin told reporters on the sidelines of Russia’s annual economic forum in St Petersburg. “This will certainly give us more certainty in the budgetary policy assumptions that we include in our forecasts.”

In the past, the rule helped Russia build up its National Wealth Fund and stabilize the economy during periods of low oil prices.

Now a strong rouble and high oil prices are helping rein in inflation that soared to a near 20-year high of around 18% after Moscow sent tens of thousands of troops into Ukraine on Feb. 24.

When asked if the recent weekly decline in consumer prices suggest that bank could hold an unscheduled board meeting as in did in May, Zabotkin said the central bank does not announce such rate-setting meetings in advance.

The central bank cut its key interest rate to the pre-crisis level of 9.5% last week and kept the door open to further easing as year-on-year inflation slowed, while noting uncertainty related to external risks such as the Western embargo on Russian oil.

(Reporting by Reuters; Editing by Mark Heinrich and Tomasz Janowski)