Russia's federal budget reported a deficit of 1.718 trillion rubles ($22.3 billion) in January, almost half of the target for the full year. This is clear from data from the Ministry of Finance published on Friday, the Moscow Times reports.
Budget revenues amounted to 2.362 trillion rubles ($30.7 billion) for the month, which is 11.6% less than the previous year.
Revenues from oil and gas fell by 50% to a five-year low of 393 billion rubles ($5.1 billion).
Revenues from taxes other than oil and gas increased by 4.5% to 1.969 trillion rubles ($25.6 billion).
VAT revenues jumped by almost 25% to 1.13 trillion rubles ($14.7 billion) after the VAT rate was raised to 22% from 1 January.
However, these revenues proved insufficient to offset a sharp decline in energy revenues, even after the Finance Ministry slightly reduced spending by 1.4% to 4.08 trillion rubles ($53 billion).
As a result, the deficit for January exceeded that of January 2025, reaching 17%.
Overall, according to the Finance Ministry, Russia's budget deficit reached 17.4 trillion rubles ($226.2 billion) after the full-scale invasion of Ukraine.
The ministry attributed the large deficit at the beginning of the year to previously planned spending.
The 2026 budget envisages the annual deficit shrinking to 3.8 trillion rubles ($49.4 billion) in 2026 from 5.7 trillion rubles ($74.1 billion) last year. However, a drop in Russian crude oil prices and difficulties in exporting oil to India could lead to a deficit nearly three times larger, a government source said. Internal estimates show the shortfall could reach 3.5% to 4.4% of GDP as oil and gas revenues fall significantly short of forecasts and military spending increases, he said. The finance ministry is likely to propose spending cuts to close the gap, the source added. Budget risks have clearly increased, economist Dmitry Polevoy said. "In a negative scenario, the authorities are likely to be forced to look for new sources of revenue, such as the non-energy sectors, the broader non-resource economy and even household incomes," he said. "among the first in line," he explained.
Despite mounting pressure, budget difficulties are unlikely to force President Vladimir Putin to end the fighting anytime soon, economist Vladislav Inozemtsev predicted.
"Putin will encourage the Central Bank to print money; he will continue to raise taxes, sell state property and nationalize business corporations," he stressed. "This will allow him to get enough money to wage the war for 2026 and, most likely, for 2027.".
The key uncertainty for the budget is whether Russia will adapt to the new sanctions that have led to concessions on its oil, investment banker Yevgeny Kogan noted.
If not, the authorities will face "painful decisions" in the second half of the year, including spending cuts, tax increases and increased borrowing, he added.