The federal budget posts surplus despite several amendments of expenditures

RUSSIA ECONOMICS - In Brief 19 Jan 2022 by Alexander Kudrin

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According to Minfin’s preliminary budget execution statistics, the federal budget posted a surplus of around R0.5 trln, which should be slightly below 0.4% of GDP. The figure looks lower than we expected, but it only happened because expenditures were suddenly increased to R24.8 trln. A couple of months ago, the governments intended to spend around R 24 trln. Note, that the initially approved expenditures were supposed to be at R21.5 trln. Unsurprisingly inflation in Russia accelerated and remains high as the effect of the year-end spending spree has yet to evaporate. In December alone the government spent over R4.8 tln, i.e., nearly one-fifth of the total annual figure.Federal budget revenues exceeded the initial plan by 34.8% and reached R25.3 trln. Despite significantly higher energy prices, non-oil-and-gas revenues remained around 64.2% of total revenues.Despite the surplus, the government continued to borrow on the local markets, having borrowed on a net basis R1.5 trln. It was well below the initial target of R2.7 trln, i.e., when the budget was planned to be in deficit. Still, net domestic borrowing amid a surplus budget was too high, unnecessary, and distortive. Equally distortive was the enormous amendment of the federal budget spending and spending spree in December.Another conclusion is that the 2022 budget, which was recently approved, already looks out of date as revenues will be much higher again this year. Hence expenditure amendments will follow, and allocation of the budgetary funds will also remain uneven. Similar macroeconomic distortions will remain in 2022 as well.In the near future we plan to issue a separate report with a detailed estimation as t...