Russia's budget deficit soars as oil prices plummet
Russia has tripled its budget deficit forecast for 2025, primarily due to falling oil prices. The Kremlin does not intend to reduce defence spending. The Russian Finance Minister announced that "social support for citizens, funding for the defence and security of the state, support for families of participants in the special military operation" won't change.
What you need to know
- Russia has tripled its budget deficit forecast for 2025. Falling oil prices and a strengthening rouble have compelled the government to revise its forecasts.
- Finance Minister Anton Siluanov emphasised that defence remains a priority. Defence spending and social support for the families of "military operation participants" will continue irrespective of external conditions.
- Russia has already raised several key taxes. This includes the income tax on individuals and corporate profit tax.
The decline in oil prices and a strengthening rouble have forced the government to adjust its federal budget revenue forecasts by 4.5%.
Revenues are expected to sharply decline from a previously forecasted 40.3 billion roubles to 38.5 billion, while expenditures will rise from 41.5 billion to 42.3 billion roubles, according to the Nexta portal, noting that this represents a record deficit.
Observers note that solid finances have so far helped Russia endure global crises. However, the risk this year is heightened by the rising costs of the war in Ukraine and Western sanctions.
Russia with a budget gap. The Kremlin will not economise on defence
Overall, due to cheap oil, the state treasury will lose 2.6 billion roubles in oil and gas revenues. Consequently, the budget deficit is expected to more than triple, from 0.5% to 1.7% of GDP.
According to the Moscow Times portal, Finance Minister Anton Siluanov stated that defence remains the most important budgetary priority.
- The budget priorities remain unchanged. These are social support for citizens, funding for the defence and security of the state, support for families of participants in the special military operation - he said in a statement.
Many analysts believe that if the government wants to balance future budgets without cutting defence spending, it will have no choice but to raise taxes, reduce sensitive social spending, and take out loans, according to Reuters.
The agency notes that Russia has already increased several key taxes this year, including the socially sensitive income tax on individuals and corporate profit tax.
