Federal budget deficit widened in July amid increased spending

RUSSIA ECONOMICS - In Brief 12 Aug 2020 by Alexander Kudrin

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The Russian federal budget deficit widened in July so that the 7m20 tally reached R1.5 trln as in 1H20 it was slightly over R1.8 trln. Expenditures in July exceeded R2.0 trln while in 1H20 average monthly expenditures stood below R1.7 trln. As is happens regularly, the Finance Ministry releases preliminary information on allocated expenditures, but next month it turns out that actual expenditures remained somewhat lower, and they are backwardly revised down. Therefore, it is likely that in a month from now, July’s federal budget expenditures could be corrected by around R0.1 trln or a bit more.On the revenue side, oil-and-gas revenues picked up and exceeded R340 bn, as the oil price moved well above $40/bbl. In May and June, oil-and-gas revenues stood at R214 bn and R224 bn respectively. As the ruble weakened in August, while the oil price remains at a very comfortable over $40/bbl levels, these revenues will likely be higher – possibly not in August alone, but in the rest of the year.Higher oil-and-gas revenues were able to partially offset relatively low non-oil-and gas revenues. In total, federal budget revenues exceeded R1.3 trln in July, which was only slightly lower than average monthly revenue flow in 1H20 (around R1.5 trln).All in all, it appears that the federal budget deficit is likely to stay around R4.0 trln this year which will be less than 4% of GDP which will be easy to finance as the government has plenty of cash in reserves, including on treasury accounts, and keeps issuing local bonds. In July local borrowing reached R225bn in gross terms which brought the 7m tally to over R1.8 trln (R1.9 trln YTD). It cannot be ruled out that the R2.3 trln local borr...