The latest figures from the Russian Ministry of Finance reveal the country’s budget deficit has surpassed the Kremlin’s entire 2023 target in the first four months of the year as spending on the war in Ukraine and falling revenue from oil and gas take their toll.
From January to April, the deficit was 3.42 trillion rubles ($45 billion), almost 520 billion rubles ($6.9 billion) more than the Russian authorities had planned for the whole year.
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“Oil and gas revenues have fallen by 52.3 percent YTD to 2.28 trillion rubles ($30 billion). The finance ministry linked this to the high 2022 base, lower Ural oil prices and a drop in natural gas exports,” the message says.
The investment banker for Dragon Capital, Serhiy Fursa, told Kyiv Post that the reported deficit is not critical for the Russian economy but signals a tough few months ahead.
“So far, this is not critical for Russia’s economy, but it points to a major problem in 2023 – a record budget deficit that forces Russia to run the printing press,” he said.
“According to economic theory, printing money should lead to a fall in the Russian ruble exchange rate and rising inflation.”
According to Fursa, the Russian authorities do not have many sources to repay the deficit, as Russia can’t use credit resources due to sanctions. This will lead to inflation and negative consequences for the Russian economy.
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“There are two sources, the sovereign wealth fund and the printing machine in Russia,” he said. “However, the actual use of the fund’s money is also of an issuance nature. Of course, they can and will raise taxes, but this resource is limited and it is negative for the economy,” he added.
Russians, seeing negative news about their economy for the first time, have reacted on social media.
“I even wonder what is really wrong with the budget if they have already started writing about its deficit?” posted one Russian citizen commenting on the news.
Some Russians are ready to endure economic hardship: “The downturn in the economy is not scary for us Russians. We’ve been through worse. We will eat grass like our grandfathers. We have cones and moss. The main thing for us is for our neighbor’s cow to die. For that, we are ready to die for ourselves and our children.”
Some are sarcastically suggesting God’s help for the Finance Ministry of to cover the budget deficit.
“How about buying a couple of ‘strong’ icons to help the Ministry of Finance?"
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