Falling oil prices could force new Russian budget

Russian Prime Minister Dmitry Medvedev has warned that the continued fall of global oil prices could force the country to revise its 2016 budget.

The continued slide in the value of oil means that Russia must be prepared for a "worst-case" economic scenario, Medvedev said.

70% drop

In the past 15 months, oil has fallen in price by 70% and this week was trading for less than $32 a barrel.

Russia is particularly vulnerable to oil price fluctuations as about half the government's revenue is generated from taxation of its oil and gas industries.

The most recent federal budget was approved last October, but its calculations were based on

an oil price of $50 a barrel throughout this year, which has now been described as "unrealistic" by President Vladimir Putin.

Spending cuts

Now Russian government departments have been given orders to cut spending by 10%, Reuters reported. Although pensions and government workers' salaries will be exempt, the savings are still estimated to be around 700bn roubles (£6.3bn).

The problems facing the country are highlighted by Finance minister, Anton Siluanov, claiming that

Russia's budget could only be balanced if oil prices were at $82 a barrel.

Biggest risk

Mr Siluanov said: "Our task is to adapt our budget to the new realities."

He added: "The biggest risk is that there will be low prices for a long time – that is, for years, for decades.”

Current inflation rates are 15% in Russia, although its central bank aimed for it to fall to 4% by next year, which now seems highly unlikely.