The federal budget deficit continues to widen, the Russian Ministry of Finance reported on Tuesday.

From January to November, the budget deficit reached 4.276 trillion rubles, 11.8 times higher than the same period last year (362 billion rubles).

Budget revenues virtually stopped growing—32.9 trillion rubles over the 11 months (+0.7%), while expenditures increased by 12%, reaching 37.775 trillion rubles. As a result, every ninth ruble spent by the government was not backed by tax revenue.

The decline in oil and gas revenues continues to accelerate, according to Ministry of Finance data: at the end of November, they were 22.4% below last year's level, following a 21% decline in October and September and a 20% decline in August.

Non-resource tax revenues increased by 11.3% to 24.871 trillion rubles. However, VAT collections only increased by 5.6%, and in real terms (adjusted for inflation), revenues from it decreased. This "is consistent with cooling trends in domestic demand," explains the Ministry of Finance, noting that the non-oil and gas revenue collection plan was reduced (by a total of 2.2 trillion rubles).

Initially, the government projected a modest deficit of 1.2 trillion rubles (0.5% of GDP) in the 2025 budget, but falling oil prices, a strong ruble, and a sharp economic slowdown forced officials to raise the forecast fivefold to 5.7 trillion.

In reality, even this plan may prove unfeasible, believes Janis Kluge, a research fellow at the Institute for International Security Studies. Budget expenditures typically peak in December—18% of the annual budget—but this year, by the end of November, the government had already spent 87% of the budget. If historical proportions persist, the budget deficit by the end of the year could reach 8 trillion rubles, or 3.6% of GDP, Kluge predicts.

The Ministry of Finance claims there will be no December spending surge this year: a significant portion of it has already been financed in advance at the beginning of the year. In this case, the December deficit this year will be half that of last year—1.5-1.7 trillion rubles—and the annual deficit will be close to plan, according to economist Yegor Susin.

In December, the budget faces a shortfall in oil and gas revenues, according to a Gazprombank analyst: discounts on Russian oil due to US sanctions have exceeded $25 per barrel, and prices in Black Sea and Pacific ports have plummeted to their lowest since the start of the war. Even if the Ministry of Finance cuts December spending, the deficit could reach 6 trillion rubles by the end of the year, Gazprombank warns.

Actual revenues from key items were significantly lower than planned this year due to "worsening economic conditions," notes Emil Ablaev, an expert at the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF). "A sharper economic slowdown determined a lower level of corporate profits and, consequently, led to a decrease in profit tax revenues," while revenues from foreign trade fell due to "declining commodity prices and the restrictive measures being introduced," Ablaev notes.

source: The Moscow Times https://archive.is/28ate