The federal budget and the current account balances strengthen in May

RUSSIA ECONOMICS - In Brief 10 Jun 2021 by Alexander Kudrin

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The Finance Ministry reported that in 5m21, the federal government spent 41.9% of the annual plan (R21.5 trln). It means that the federal budget expenditures were allocated evenly so far – spending reached R9.0 trln. Federal budget revenues exceeded R9.3 trln (49.7% of the official plan) over the same period implying a surplus of over R0.3 trln. These numbers were in line with GKEM Analytica’s view that the federal budget revenues will significantly exceed the target. The federal budget will be in surplus this year (as opposed to a planned deficit above R2.7 trln) – even if expenditures will be amended (which gets increasingly likely).It is not the oil-and-gas revenues alone that exceeded the plan in 5m21, but other revenues as well, as during this period, the government collected 52.3% of the targeted oil-and-gas revenues and 48.4% of the non-oil-and-gas.According to the formally approved budget, the government continued to borrow on the local market. Net borrowing reached nearly R1.1 trln. At the same time, the Ministry of Finance continued to buy FX in line with the fiscal rule (having spent over R0.6 trln as of June 9) and offering repo and deposits to banks. As a result, there was no liquidity shortage in the system. As the Russian state banks were the main buyers of the OFZs issued by the Finance Ministry, they were the major beneficiaries as the CBR began raising its key rate. Same operations will continue going forward.Meanwhile, the Central bank reported that Russia’s current surplus reached $35.8 bn and was up from $28.6 bn in 4m21. It means that a significant part of the current account surplus was purchased by the Ministry of Finance. Meanwhile, similar num...