Russia risks depleting oil savings - IMF
MOSCOW Dec 10 (Reuters) - Russia has based its three-year budget forecasts on optimistic oil price expectations that, combined with heavy social spending, may lead to the depletion of its rainy-day savings, the International Monetary Fund warned on Tuesday.
The government sees the average price for oil, Russia's main export, at around $100 per barrel over the next three years.
"For 2014 and even more for 2015-2106, budgets appear insufficiently ambitions, including due to optimistic revenue projections based on high oil-price assumptions," the IMF said in a statement after an annual mission to Moscow.
The statement shows that the IMF is notably more concerned about Russia's fiscal stance than it was just three months ago when it advised against higher spending and urged Russia to rebuild its fiscal buffers.
Last week, government sources revealed to Reuters that Russia's funding gap could reach $300 billion by the end of the decade and that the country could exhaust its $90 billion Reserve Fund within as little as three years.
In addition to a possible revenue shortfall, the IMF warned that the temporary diversion of pension contributions to the state system will create further pressures when it is reversed, as will planned infrastructure spending.
The Reserve Fund, which collects windfall energy revenues, can be used to cover budget shortfalls only after it reaches 7 percent of gross domestic product, which the Finance Ministry expects will take at least nine years.
An amendment, however, permits dipping into the fund to cover planned revenues that have not materialised.
"It is necessary to rebuild these buffers, including through pension reform and pro-growth expenditure rationalization," the IMF said.
The Fund called also for a tighter monetary policy to rein in inflation. The Economy Ministry now envisages consumer prices to rise by 6.2 percent this year, compared to the central bank's target of keeping price growth under 6 percent.
"Continued higher-than-targeted inflation - even while the economy remains near full capacity - indicates a need for a tightening basis," the IMF said.
The Fund also cut Russia's GDP growth forecast for next year to 2 percent from an earlier 3 percent, following the Economy Ministry's own downward revisions.
This is the Fund's fourth cut to its 2014 growth forecast, from an initial 3.8 percent. It also said there are risks to the new forecast from a possible tightening of global financial conditions and Russia's dependence on oil.
The Fund left its 2013 GDP growth forecast unchanged at 1.5 percent.
Last week, the Economy Ministry cut its growth forecasts to 1.4 percent this year, 2.5 percent in 2014 and 2.8 percent in 2015. (Reporting by Lidia Kelly; Editing by Douglas Busvine)
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