Russia Further Depletes Reserves to Cover Budget Shortfalls
The Russian news agency Tass reports that the government has accessed its reserve funds for the third time this year in order to cover a shortfall in the national budget. Tass reports that this time around, the government transferred $6 billion from its reserve fund.
This latest move to tap the fund brings the amount depleted from the fund to 18 percent in August to $32.22 billion. In April and May, the Russian government pulled a total of $12 billion from the fund to cover budget deficits. In July, the International Monetary Fund stated that it expected Russia to stay in its recession due to the drop in oil prices combined with sanctions from the West over the situation in the Ukraine.
The IMF expects a moderate recovery for the country in the coming year. Last week the Russian Central Bank called external conditions “favorable,” adding that the fiscal policy was showing returns, even with pressures on the country’s GNP. However, Central Bank Governor Elvira Nabiullina said the trajectory for oil, a mainstay of the Russian economy, remained uncertain.
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The second half of the summer has been rocky for oil prices, which have at times dipped below $30 per barrel, then spiked at $60 before settling somewhat in the mid-$40 range.
Yesterday, Russia and Saudi Arabia issued a joint statement that the two countries would work together to stabilize the market. In that statement, Russia, and Saudi Arabia said that they would need to take the stability initiative since the two countries produce 20 percent of the of world’s demand for crude.
The two nations said that there needed to be a “bilateral level” to monitor the factors that influence crude prices. A move to freeze the price of crude oil production at early 2016 levels fell apart earlier in the year, as some analysts said that prices have recovered to a point that they would not support such an agreement.
By Lincoln Brown for Oilprice.com
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