The government approved a draft law on new budgetary rule

© RIA Novosti / Alexander Activesprite in fotoreceptor of the government of the Russian Federation Dmitry Medvedev holds a government meeting. Archival photoThe government approved a draft law on new budgetary rule© RIA Novosti / Alexander Activesprite the image Bank

The Russian government on Thursday approved the bill on a new «budget rule», designed to limit the use of oil and gas revenues resulting from relatively high oil prices, according to the list of decisions published on the website of the Cabinet of Ministers.

Under the bill, Federal spending can be targeted to only those oil and gas revenues, which are calculated on the basis of underlying oil prices, the base export prices for gas and projected exchange rate. The base price of oil is set at $ 40 per barrel of Urals oil prices in 2017 and is subject to annual indexation of 2% starting in 2018. The other so-called additional oil and gas incomes will go on replenishment of reserves.

As noted by Prime Minister Dmitry Medvedev, is a «fiscal rule» should reduce the impact of international market oil prices on the sustainability of public Finance of the Russian Federation and to ensure a more predictable macroeconomic environment for economic development.

According to the materials of the Cabinet, the Ministry of Finance has also put in this bill to repeal the provisions of the Budget code concerning the normative value of the Reserve Fund. The old «budget rule», which is now suspended, the Ministry of Finance should submit to the Reserve Fund additional oil and gas revenues until they reach the standard value, and then proceed to the replenishment of the national welfare Fund (NWF). This proposal is due to the fact that the price of oil at around $ 40 established for the long term.

In addition, the bill limits the level of borrowing costs as debt service.

The new «fiscal rule» is expected at full strength will earn in 2019. In 2018, as in the current year, will operate a transitional provision to increase expenditure by 1% of GDP of the full level calculated by the rule.