The Ministry of Finance plans to revise the budget rule from 2027. What does this mean?

The Ministry of Finance of the Russian Federation intends to change the budget rule for the future, but in 2026 it will not be touched. The goal is to balance the budget at lower oil prices, as the current cutoff does not correspond to this. However, currently, against the background of high prices provoked by force majeure, the agency has suspended the budget rule until the summer. Why the ministry plans to revise the budget rule and how it will affect the budget is in the Izvestia article.

What is the budget rule for?

• The budget rule is the system by which the state manages budget revenues and expenditures. The authorities set a base oil price, for example, around $60 per barrel, with a gradual decrease to $55 by 2030 in increments of $1 per year.

• If the actual price turns out to be higher, the "extra" oil and gas revenues are allocated to reserves. If the price falls below the set level, the government uses the accumulated funds to cover the deficit. This approach helps to make the budget more stable and predictable.

• This mechanism distributes oil revenues over a long period of time. The authorities send part of the funds to the National Welfare Fund — it accumulates a financial reserve in case of a decrease in income. It is also used to finance major projects and support the economy. This reduces the country's dependence on sharp fluctuations in commodity prices and allows for a more even use of resources.

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• The budget rule affects the economy as a whole. It limits the rapid growth of expenses during periods of high incomes. The rule also helps to contain inflation. It reduces the impact of oil prices on the ruble exchange rate. The Ministry of Finance buys foreign currency and gold with an increase in income. These actions reduce the pressure on the economy and help maintain stability.

• The rule parameters are periodically reviewed. The authorities take into account the situation on the global oil market and price forecasts. The reduction in the cut-off price to $55 by 2030 reflects expectations of lower prices in the future. All this helps to make the budget more sustainable and reduces risks in the medium and long term.

How the cut-off price changed

• The cut-off price in Russia's budget rule changed along with the economy and oil prices. In 2004, it was set at about $20 per barrel, then increased to $27. This made it possible to save extra income when prices rose.

• After the 2008 crisis, the benchmarks became higher as the oil market changed. In 2017, a new formula was introduced with a base price of about $40 per barrel and annual indexing. This approach has made the budget more resilient to fluctuations.

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Will these additional revenues cover the treasury deficit and what will happen to the ruble exchange rate in 2026

• The mechanism has been changed several times in recent years. So, in 2022 it was temporarily suspended. Then we updated the income calculation formula. In 2025, it was decided to reduce the cut-off price from $60 to $55 per barrel by 2030 in increments of $1 per year.

New revision

• Energy prices rose in March due to tensions in the Middle East and supply disruptions, which temporarily increased Russian revenues. At the same time, real budget revenues remain lower than last year's, because some of Russia's exports are facing restrictions, and the cost of freight has increased. Therefore, the Ministry of Finance does not focus on the current surge in prices and sets a lower level for the future in order to protect the budget from falling revenues in advance.

• The Ministry of Finance has temporarily suspended the budget rule and will return to it in the summer, focusing on the situation with energy prices. In March, prices rose above $100 per barrel and sharply increased budget revenues. At the current cut-off price, excess oil and gas revenues are automatically allocated to reserves. The authorities decided to take a break to assess the sustainability of high prices.

• However, in long—term planning, the Ministry of Finance does not focus on the current surge in prices and sets a lower level for the future in order to protect the budget from falling revenues in advance. In this regard, the ministry is discussing a new revision. The actual receipts are below the planned values, and the authorities are considering more stringent parameters. Reducing the base oil price in the rule will allow for faster accumulation of funds and increase budget sustainability.

• An additional factor is related to expectations for the oil market. The Ministry of Finance believes that prices may gain a foothold at a lower level in the future. The current cut-off price does not provide the necessary balance. Therefore, the authorities want to adapt the rule in advance to a more conservative scenario. The discussion concerns the next few years, as the mechanism itself is designed for long-term use.

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• The current market situation also influences decisions. At the beginning of 2026, oil prices were rising and temporarily increased budget revenues. The authorities are guided by long-term trends. They do not base their policy on short-term jumps. Also in March, the Ministry of Finance suspended operations with currency and gold. This is due to the preparation of new parameters of the budget rule and the adjustment of financial policy.

What does this mean?

• The Ministry of Finance wants to change in advance the rules by which the country spends and defers oil and gas revenues, starting in 2027, so that the budget becomes more sustainable. Currently, the base oil price of $59 per barrel is used, and at a higher price, excess income is allocated to reserves. However, this level no longer provides a reliable budget balance, and therefore they are discussing lowering this level in order to be less dependent on market fluctuations and plan expenses more carefully. This will help to accumulate funds in the reserve faster and reduce the risk of shortages when oil prices fall.