KSE Institute expects Russia’s 2023 budget deficit to come in 3-4 times larger than last year and the National Welfare Fund’s liquid assets to be depleted by the end of the year as a result. In February 2023, the federal government deficit reached 820 billion rubles, bringing the total for the first two months of the year to 2.6 trillion rubles, which represents 88% of the planned deficit for the entirety of 2023. 

Although February revenues were noticeably higher than in the previous month, Russia is lagging behind both 2021-22 averages and budgetary plans. Additionally, expenditures remain elevated due to the ongoing invasion of Ukraine.

Oil and gas revenues in January and February were 46% below their level in the corresponding period in 2022, and non-oil and gas receipts were 10% below. Meanwhile, expenditures remain 51% above their level in January and February 2022. In response, the Kremlin announced that it would change the benchmark tax oil price. However, KSE Institute believes this will result in additional revenues of only around 600 billion rubles and not fundamentally change the situation. 

Due to its use for budgetary support, Russia’s National Welfare Fund (NWF) shrank by 1.4 trillion rubles in 2022Q4 alone. At this pace, the NWF’s liquid portion will essentially be depleted by the end of this year. Therefore, KSE Institute expects Russia to face serious financing challenges and urges Ukrainian allies to strengthen sanctions.

You can read the full version of “Russia Macro Update: Deficit Target Already Obsolete” by KSE Institute via link: https://bit.ly/3T0lzAP