The Russian federal budget posted revenue growth of 50% year on year to RUB11.7 trillion ($128bn) in 4M24, achieving revenue growth rate of 41% y/y in April 2024 alone, according to the preliminary data from the Finance Ministry and calculations of RBC business portal. (chart)

Spending was up by 21.5% y/y to RUB13.2 trillion in 4M24, up by 25% y/y in April alone, making a deficit of RUB1.48 trillion in 4M24. Despite halving y/y from RUB3 trillion seen in the same period of 2023, the deficit came close to the full-year target of RUB1.59 trillion as early as end of April.

The deficit jumped from RUB607bn seen in the first quarter, even as the high oil prices maintained over 80% y/y growth. 

The FinMin attributed the ahead-of-the schedule budget deficit in April to “advance spending on certain contractual obligations” for the second month in a row. However, such spending dynamics in the beginning of the year are unusual - historically the federal spending spikes in the last two months of the year.

On the revenue side, the main growth driver was the non-oil and gas revenues, which climbed by RUB2 trillion (37% y/y) to RUB7.53 trillion. VAT collections (domestic and import VAT) increased by 27% to RUB3.6 trillion. 

Oil and gas revenues in 4M24 were up by 82% y/y to RUB4.16 trillion, mainly due to higher prices for Russian oil, as well as a one-time receipt in February of additional payment on mineral extraction tax on oil for the fourth quarter of 2023, according to MinFin.

The growth in the deficit and acceleration of spending was due to the Finance Ministry front loading end of year spending again, but spreading it out over the first quarter. MinFin typically does a fifth of its entire year spending in December, but since last year has tried to get some of that spending out of the way early. 

Last January, the deficit blew out to a whopping RUB1.7 trillion as a lot of the end of year spending was moved to the very start of the year. This time round, MinFin is spreading the early spending over several months, and it picked up in February-April. 

"In February-March, spending became more active, but in general the situation is planned out, without surges," the minister said.

"Accelerated expenditure financing in February-April 2024 is related to fast conclusion of contracts and advance financing on certain contracted expenditures among other things," the ministry noted.

The strong performance of the budget means that Siluanov says the budget is on course to hit the full year target of 0.9% of GDP, or just under RUB1.5bn, part of which will be funded by tapping the National Welfare Fund (NWF) again. Currently, there is around RUB4.8 trillion in Russia’s rainy day fund. 

"The dynamics to fulfil the budget are better than in previous years. The budget deficit is currently expected to be RUB1.4-1.5 trillion. The parameters for execution are within the framework of the planned expectations," Russian Finance Minister Anton Siluanov said in an interview with Interfax.

Siluanov said that the budget law provides for an increase in revenues of RUB5.9 trillion, or 20%, while a significant part of the increase should be provided by oil and gas revenues (an increase of RUB2.7 trillion), based on the forecast dynamics of energy prices, the exchange rate and amendments to fuel and energy legislation. The application of the budget rule mitigates any potential risks in terms of oil and gas revenues, he said.

"Current expectations for the year confirm our previous forecasts," the minister said, Interfax reported. 

Despite the strengthening of secondary sanctions in 2023, oil and gas revenues are expected to be within plan, Siluanov said. "We are coordinating oil production and export volumes with OPEC countries," the minister said. Exporters have established supply chains, and current oil price levels "will make it possible to fulfil plans for oil and gas income, even taking discounts into account," he said.

As bne IntelliNews reported oil sanctions have largely failed to reduce Russia’s oil and gas revenues, but there is signs of stress in the system as the discount that Russia has to offer on its Urals blend oil compared to the Brent blend benchmark has increased from around $10 per barrel to $16 now, according to research by Kyiv School of Economics (KSE). The discount on Russia’s  ESPO blend that is largely sold to China and is largely transported by pipeline has been little affected.

The law provides for an increase in non-oil and gas revenues of RUB3.2 trillion, according to MinFin, including by means of one-time large transfers (in particular, the return from social funds of transfers associated with previously granted deferments on insurance premiums, and increased export duties on a wide range of products). 

The growth of this income is also associated with an increase in receipts of key tax payments, primarily VAT and other turnover taxes, which are estimated at about RUB1 trillion in total, the minister said.

 

Russian budget RUB bn
	3M23	3M24	3 months change % y/y	4M24	4 months change % y/y
Revenues	5,679	8,719	53.5	11,684	50.1
Oil & gas rev	1,635	2,928	79.1	4,200	82.2
Non-oil & gas	4,044	5,791	43.3	7,500	36.8
VAT	2,693	3,356	24.6	3,600	25.4
Expenditures	7,765	9,326	20.1	13,168	21.5
Deficit cash	-2,086	-607		1484
Deficit%GDP	-1.2	-0.3		-0.9
source: MinFin