Federal budget in 2M26: revenues lag the plan, spending is far ahead

RUSSIA ECONOMICS - In Brief 12 Mar 2026 by Evgeny Gavrilenkov

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The Ministry of Finance reported that in 2M26, the federal budget deficit reached nearly R3.5 trln, which was very close to the annual target of about R3.8 trln. In nominal total terms, revenues were down by 10.8% y-o-y while expenditures were up by 5.8% y-o-y. Oil-and-gas (O&G) revenues were down by 47.1%, while non-O&G revenues increased by 4.1%, out of which VAT collection grew by 10.8% (all numbers are 2M26 y-o-y). As in recent years, the intra-year spending pattern changed (the government now spends more in the early months of each year, spending moderates afterwards, and soars again in November-December), the budget deficit appeared wider. We repeatedly mentioned previously that, combined with a widened spread between Urals and Brent blend prices, the abnormally strong ruble USD/RUB caused even more problems for the budget as it also trimmed some non-O&G taxes, such as VAT on imported goods. As the oil price soared in recent days and will likely remain elevated for some period, the budget could collect more revenues, but it won’t solve other revenue problems, such as slow economic growth. One cannot rule out that the budget deficit limit for this year may be revised. As the economy is no longer overheated and credits to households grow moderately, well below 1.0% m-o-m in the recent six months in the aftermath of a period of m-o-m contraction, the CBR will likely keep cutting the key rate. In any case, the role of O&G revenues is no longer as important for the federal budget as it was a decade or two ago, when it accounted for about one-half of total revenues. In 2025, its share fell to 24.4%, and in 2M26, it went further down (to about 17.5%). The ruble being to...