The Russian budget remains in surplus in 1H22

RUSSIA ECONOMICS - In Brief 13 Jul 2022 by Alexander Kudrin

---

The Ministry of Finance reported that in 1H22, the federal budget revenues reached R14.0 trln, i.e., 56.0% of the target. Spending reached R12.6 trln over the same period (53.4% of the annual target). These targets, though, are supposed to be somehow amended once the 2023 draft budget is submitted to the Duma. So far, the federal budget remained in surplus (R1.4 trln in 1H22). In June alone, revenues and expenditures reached R2.0 trln and R2.1 trln accordingly, implying the budget was in small deficit that month.It is expected that expenditures will be lifted strongly (from the current target of R23.7 trln) this year, while the government is unlikely to significantly amend the revenue target (R25.0 trln). Though it is likely that actual revenues will be well above this level as the flow of non-oil-and-gas revenues remains relatively stable, so that in 1H22 the government collected 49.6% of the yet unammended annual target. The flow of oil-and-gas revenues is much more volatile due to wide ruble fluctuations. Meanwhile, as the ruble was strong in May and June, the government was still able to collect over R0.7 trln of oil-and-gas revenues in June alone. In July, this amount may be slightly lower due to lag effects but still it looks as though the government will be able to exceed the current annual target of the oil-and-gas revenues (R9.5 trln) by around R0.8 trln (unless the oil price falls dramatically from the current levels). In 1H22 the government accumulated 66.8% of the unammended annual target for such revenues. Overall, the 2022 budget may post a relatively small deficit, which will be easily financeable from domestic sources. Evgeny Gavrilenkov Alexander Kudrin