INSUBCONTINENT EXCLUSIVE:
Russia's budget deficit rose by 168 billion rubles ($2.18 billion) in May, bringing the total for the first five months of 2025 to 3.4
trillion rubles ($44.2 billion), or 1.5% of GDP, according to the Finance Ministry.That is nearly five times higher than the same period of
were somewhat worse than expected, economist Yegor Susin said
hoped.Susin estimates that the current deficit trajectory is running at about 1% of GDP higher than planned, which translates to nearly 6
trillion rubles ($78 billion).Analysts at MMI warn that the budget situation is becoming increasingly critical and expect the deficit to
reach 6 to 7 trillion rubles ($78-91 billion).Before the full-scale invasion of Ukraine, government spending was fairly evenly spread
throughout the year, with a spike in December to close out contracts.But since 2023, the Finance Ministry has front-loaded military
expenditures early in the year, with spending returning to normal mid-year before another jump in November-December
The ruble appreciated for a sixth consecutive month in May, while oil and gas revenues fell to just 513 billion rubles ($6.67 billion),
their lowest point in two and a half years.Over the first five months of 2025, these revenues totaled 4.24 trillion rubles ($55.1 billion),
down 14.4% from a year earlier (after four months, the shortfall was 10.3%)
The 2.6 trillion ruble ($33.8 billion) decline in oil and gas revenues is the main reason for the budget revision.While these revenues still
exceed the baseline level, the Finance Ministry warns of risks due to weakening price conditions.Non-oil and gas revenues are providing some
Their inflow slightly exceeds the revised target, which was increased by 0.8 trillion rubles ($10.4 billion).In May alone, they brought in
This growth is largely due to higher corporate profit taxes introduced this year
Turnover taxes, including VAT, also rose by 5.8% compared to last year.Budget spending in May totaled 2.6 trillion rubles ($33.8 billion),
and 18.1 trillion ($235.3 billion) over five months, 3.1 trillion ($40.3 billion) more than the same period last year.Some of this spending
was financed by extra non-oil and gas revenues received at the end of 2024, the Finance Ministry says, expressing confidence that the budget
for January-May holding steady at 21%.The Finance Ministry plans total spending of 42.3 trillion rubles ($549.9 billion) for the year, which
They expect total spending of at least 44-45 trillion rubles ($572-585 billion), while revenues will fall short by at least 0.5 trillion
annual target, the Finance Ministry would need to maintain a monthly surplus of 270 billion rubles ($3.51 billion) from May through
November, according to Gazprombank analysts
the budget deficit would improve after peaking in May-June
But they noted that economic slowdown, worsening trade conditions, high interest rates and geopolitical challenges are all putting pressure
on the budget and worsening existing imbalances.Still, they believe borrowing and the use of liquid assets from the National Welfare Fund
could cover the shortfall.The liquid portion of the fund had fallen to 2.8 trillion rubles ($36.4 billion) by the end of May, with 447
billion ($5.81 billion) allocated to cover the oil and gas revenue shortfall.
