* Budget shortfall up to $30 bln if oil prices stay at $30
* With easy options gone, officials considering risky
* Discussions held on how rouble rate could help budget -
By Margarita Papchenkova, Darya Korsunskaya and Elena
MOSCOW, Feb 10 Russia is running out of options
to plug a yawning hole in its budget - and steps unthinkable
before oil prices began to plunge 20 months ago are now being
Two senior financial officials told Reuters that authorities
were discussing the possibility of calculating rouble rate
levels against the dollar that could compensate for some budget
losses caused by tumbling oil export revenues by preventing the
rouble from strengthening too much.
They did not say authorities would attempt to publicly set
such a rate, and the central bank - which is independent of
government - said the rouble rate was determined by foreign
exchange supply-and-demand on the domestic market.
But to influence the currency in a way favourable to the
budget, the central bank would not have to return to the policy
of publicly targeting a rate, one of the sources said. The pace
and volumes in which it carries out foreign exchange
transactions can affect the strength of the rouble.
The discussions are a measure of the plight facing the
Russian budget. It could face an additional shortfall of up to
2.5 trillion roubles ($31.7 billion) this year if crude prices
stay at around $30 per barrel, putting at risk the target of
keeping the deficit at 3 percent of gross domestic product.
The steps now being considered by officials to fill the gap
are unorthodox - illustrating how Moscow has run out of easy
fixes after crude's plunge from a peak of around $115 in June
2014, and is scraping the barrel to keep the budget on track.
President Vladimir Putin's government has already suggested
it may tap the sovereign wealth Reserve Fund, raise oil taxes,
sell off some of the state's biggest firms or hike dividend
payouts from them, among potential measures.
The rouble rate level discussions reflect the fact that a
weaker domestic currency would shore up the country's finances
as every dollar Russia earns from exporting oil buys more
roubles that can go on state spending - even though in the
longer term it could damage the economy.
A spokeswoman for the finance ministry did not return calls
seeking comment. But a source at the ministry estimated that a
movement of the rouble rate by 1 rouble against the dollar under
the current oil price would add or wipe away around 35-40
billion roubles from the budget.
There is no suggestion a rate will be publicly set, which is
the province of the central bank. In a written reply to Reuters
questions, the bank said it was sticking to its floating foreign
Nevertheless, to influence the rouble's strength, the
central bank would not have to reintroduce the practice of
publicly targeting a rate, which was withdrawn in late 2014 to
maintain gold and forex reserves.
It would be enough for it to speed the pace at which it
rebuilds those reserves; building up its reserves involves
selling roubles on the market, which could weaken the currency.
Last year, the central bank said it intended to keep
accumulating its gold and foreign exchange reserves until they
reach a "comfortable" level of $500 billion, from $371.3 billion
The central bank is not currently active in adding to its
reserves but can take action when the time is right, said
another financial official. "No one has cancelled the target of
$500 billion," the source added.
A weaker rouble could offer badly needed support to the
budget by bringing in some additional revenues, but it could
come at a cost further down the road to the economy, which
shrunk by 3.7 percent last year and is expected to contract by
another 1 percent this year.
Dmitry Polevoy, head economist at ING in Moscow, said a
weaker currency could drive up inflation and in the end lead to
an increased burden on the budget, as some spending would need
to be adjusted for price increases.
"I believe the currency rate should not be seriously viewed
as a tool helping to solve all the problems. It may be viewed as
some kind of balancing factor only," he said.
Some other measures for plugging the budget shortfall could
be less risky.
Privatisation this year, focusing on some big firms, is
expected to bring in up to 800 billion roubles if successful.
Meanwhile, an increase in dividends to the government from state
firms, if approved, should bring in another 110 billion roubles,
the economy ministry said last week.
There are downsides, of course. Privatisation in the current
market conditions means selling assets at relatively low prices,
and the dividend hike means state firms will have less money for
investment, which could hit the wider economy.
Those two measures together would anyway still leave a
potential additional budget shortfall in excess of 1 trillion
roubles this year.
Squeezing out money from elsewhere would encounter stiff
resistance and, like the other measures, could have long-term
consequences for the Russian economy.
According to Sberbank CIB estimates, under an oil price of
$30 per barrel the proposal to change the way mineral extraction
tax is calculated, announced by Finance Minister Anton Siluanov
last week, could beef up the budget by another $12 billion.
It would, however, risk a backlash from the politically
influential oil industry which argues that higher taxes would
mean less investment and a drop in output.
Last year, the finance ministry proposed to delay a promised
cut in oil export duty, hoping to secure around 200 billion
roubles. Yet, at an oil price of $30, the extra cash accrued
from that delay could be three-quarters less than originally
envisaged, according to three financial sources.
The finance ministry has also recently suggested taking back
funds from ministries' budgets that had been approved but not
spent as of Oct. 1 of the previous year. At the end of last
year, ministries were sitting on around 800 billion roubles of
unused funds, one of the financial sources said, describing it
as "a measure of great potential".
But that means ministries would have less to spend. Some
analysts warn that cutting budget spending in this way could
accelerate the contraction of the economy.
And other reforms may yet creep onto the table - ones
potentially most unpalatable to public.
Vladimir Tikhomirov, an economist at BCS Financial Group in
Moscow, said some measures could be introduced after
parliamentary elections set for September.
"The government will have many more options to adjust budget
spending and revenue, taking into account the social sector. I
do not exclude a number of unpopular measures: from the pension
system to hiking taxes on population."
($1 = 78.7110 roubles)
(Editing by Katya Golubkova, Christian Lowe and Pravin Char)