The federal budget still in surplus in 8M22 but is likely to turn into deficit already in 9M22 as expenditures to catch up with amended plan

RUSSIA ECONOMICS - In Brief 12 Sep 2022 by Alexander Kudrin

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The Ministry of Finance reported that the federal budget revenues and expenditures reached R17.60 trln and R17.46 trln accordingly implying as surplus of R0.14 trln. In August alone revenues reached R1.83 trln while expenditures were at R.2.17 trln. Hence, the federal budget deficit in August was reported at R0.34 trln. Total revenues in August were higher than in July, indicating that economic activity was gradually picking up. Oil-and-gas revenues in July exceeded R0.7 trln, while in August they fell below this benchmark, which is not surprising as the oil price fell while the ruble to dollar exchange rate didn't change much. As the government proposed to amend the 2022 federal budget quite significantly (so that expenditures should reach R27.2 trln versus initially planned R23.7 trln) in the remaining four months of the year the federal government has to spend around R9.7 trln. It is almost certain that the State Duma will approve the amendments and monthly expenditures are set to rise on average. Though, as it happened many times in the past, the bulk of the expenditures will be allocated in December. Rising expenditures will increase inflationary pressure, but not immediately. The proposed budgetary amendments suggest that federal budget revenues should reach R25.5 trln in 2022 instead of R25.0 trln targeted earlier. Mostly likely the revenue figure will be higher and may reach R25.8 trln implying a bit smaller budget deficit. Even though the Ministry of Finance plans to resume borrowing on the local market, it has plenty of cash in reserves to finance the deficit. Evgeny Gavrilenkov Alexander Kudrin