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Expert: Collapse of oil price below $50 in recent days sharply increases volatility of Russian ruble

02.03.2020,15:58


March 2, Fineko/abc.az. Expert economist Rovshan Agayev calculated the minimum favorable oil price for the State Budget and the balance of payments for 2020 as a result of the calculations.

ABC.AZ reports that the expert noted that the rapid reduction in the price of oil has re-actualized discussions related to the violation of macroeconomic stability in resource countries.

"For example, Russian Finance Minister Anton Siluanov said that the fiscal system of his country is able to withstand the cost of $30 for 4 years - but this is, of course, possible due to the support of budget obligations with these reserves. But, of course, this price is interpreted only from angle of the stability of the budget system," Agayev emphasized.

According to the economist, macroeconomic stability is more affected by the strength of the monetary system than by the stability of the budget system, which primarily affects the stability of the exchange rate: "For example, the trend of recent days shows that the collapse of oil price below $50 sharply increases the volatility of the Russian ruble. That is, according to Siluanov, at the $30 level, the country can survive an "exchange rate disaster". Taking into account that the macroeconomics of the budget system is not autonomous, and difficult processes caused by sharp changes in the exchange rate, especially high inflation, and a sharp decline in economic activity, also make a budget crisis inevitable.

In this regard, for resource countries the minimum favorable oil price is characterized by fiscal stability and exchange rate stability, but it is the price of exchange rate stability that is decisive. As the government can regulate its fiscal obligations if necessary, reducing budget expenditures, reducing the favorable price limit of oil for the budget, in particular, under conditions of a high share of corruption in the budget, this is not so difficult.

However, adapting the balance of payments in the short-term prospect, in particular part of the current accounts to the minimum available price, which does not pose a risk to macroeconomic stability, is not a problem that is in the hands of the government. For example, it is possible to reduce the current account deficit by reducing imports, especially by reducing government imports that serve the interests of corruption, capital inflows to the side, and reduce the financial account deficit by administrative means."