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Russia's Jan budget deficit widens as energy revenues slump

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BM.GE
07.02.23 00:00
381
Slumping energy revenues and soaring expenditure pushed Russia's federal budget to a deficit of 1.76 trillion roubles ($24.78 billion) in January, as sanctions and the cost of Moscow's military campaign in Ukraine choke the economy's prospects.

Citing preliminary data, Russia's finance ministry said on Monday oil and gas revenues were 46.4% lower at 426 billion roubles ($6 billion) in January than in the same month last year, which it put down primarily to lower prices for Russia's Urals blend and lower volumes of natural gas exports.

Non-oil and gas revenues were 28% lower at 981 billion roubles ($13.7 bln), attributed to lower domestic VAT and income tax takings.

Overall, budget revenues for the month were down 35.1%, while spending was 58.7% higher in January 2023, at 3.12 trillion roubles ($43.6 bln), already more than 10% of the full-year spending plan.

Moscow relies on income from oil and gas - last year around 11.6 trillion roubles ($ 162 bln) - to fund its budget spending, and has been forced to start selling international FX reserves to cover a deficit stretched by the cost of the Ukraine conflict.

SANCTIONS

While some Russian officials have sought to downplay the efficacy of price caps and embargoes on Russian energy exports, Finance Minister Anton Siluanov said last year that a price ceiling on Russian oil could widen the budget deficit in 2023.

As a consequence of sanctions, Moscow has been forced to sell energy at a large discount and, although the 2023 budget is based on a Urals price of $70.10 per barrel, the average price for Russia's main blend in January was $49.48 a barrel, down 42% on January 2022.

The ministry said on Monday it was studying ways to switch to an alternative price indicator for tax purposes, as the Urals oil price was becoming less representative of export prices for Russian oil.

January's deficit already stands at 60% of the whole year's plan of 2.93 trillion roubles ($ 41 billion) and analysts expect the shortfall to widen to more than 5 trillion roubles ($70 billion) if current conditions persist.

Russia's main sources of covering the budget deficit are domestic borrowing, which it stepped up sharply in the final quarter of 2022, and its rainy day fund of accumulated energy revenues.

On Monday, the ministry said the National Wealth Fund (NWF) stood at $155 billion, with 38.5 billion roubles worth of Chinese yuan and gold spent in January to cover the deficit, U.S. News reports.

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