Russia’s budget deficit growing due to sanctions
2023.02.06 12:56
Russia’s budget deficit growing due to sanctions
By Ray Johnson
Budrigannews.com – In January, Russia’s federal budget ran a deficit of 1.76 trillion roubles ($24.78 billion) due to falling energy revenues and rising expenditures, as sanctions and the cost of Moscow’s military campaign in Ukraine stifle the economy’s prospects.
Russia’s finance ministry reported, citing preliminary data, that oil and gas revenues were 46.4 percent lower at 426 billion roubles in January than in the same month last year. The ministry attributed this decrease primarily to lower prices for Russia’s Urals blend and lower export volumes.
Overall, budget revenues decreased by 35.1 percent for the month of January 2023, while spending increased by 587.7 percent to 3.12 trillion roubles.
Moscow’s budget spending is funded by income from oil and gas, which totaled approximately 11.6 trillion roubles last year. However, the cost of the Ukraine conflict has increased Moscow’s deficit, forcing it to begin selling international reserves.
Finance Minister Anton Siluanov stated last year that a price ceiling on Russian oil could widen the budget deficit in 2023, despite the fact that some Russian officials have attempted to downplay the effectiveness of price caps and embargoes on Russian energy exports.
Moscow has been forced to sell energy at a significant discount due to sanctions. According to the finance ministry, the average price of Russian Urals oil in January was $49.48 per barrel, down 42% from January 2022.
“Approaches to switching to an alternative price indicator for purposes of taxation are currently being studied,” the ministry stated in a Monday statement. “Given the decreased representativeness of the Urals oil price as an objective price indicator for export prices of Russian oil at the present time,” the ministry added.
Domestic borrowing, which Russia significantly increased in the fourth quarter of 2022, and its accumulated energy revenue rainy day fund are Russia’s primary sources of covering the budget deficit.
The ministry said on Monday that the National Wealth Fund (NWF) was at $155 billion. In January, 38.5 billion roubles worth of gold was spent to cover the deficit.
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