The federal budget deficit is expected to surpass the revised target

RUSSIA ECONOMICS - In Brief 09 Sep 2025 by Evgeny Gavrilenkov

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According to the Ministry of Finance's 8M25 budget execution statistics, total revenues increased by only 3.0% year-on-year, covering about 61.6% of the adjusted annual plan. The original plan projected oil-and-gas (O&G) revenues at R10.9 trln, but this was revised down to R8.3 trln. Due to a stronger ruble and a peculiar USD/RUB exchange rate, O&G revenues dropped by 20.2% y-o-y. Meanwhile, non-O&G revenues rose by 14.3% y-o-y, reaching 58.6% of the revised plan, which was slightly increased from R29.4 trln to R30.2 trln. The government revised its expenditures, increasing them slightly from R41.5 to R42.3 trln. In the first eight months of 2025, expenditures surged by 21.1% y-o-y, reaching about 66% of the adjusted 2025 target and aligning with the financing plan. The federal budget deficit target for this year has been raised from R1.2 trln to R3.8 trln. We cannot rule out a possibility of it exceeding R4.0 trln as oil and gas revenues may fall short of the reduced annual target. However, it won’t create many problems for the government. The budget and economy could benefit from a weaker ruble, but it’s uncertain what actions the government will take or when. Options are limited, as the ruble has shown little movement since mandatory FX sales were abolished recently. The costs of expanding the use of local currencies in foreign trade payments have proven quite significant for the budget. The 8M25 budget execution data suggests that next year’s budget will probably be less expansionary than expected. This indicates that disinflation is likely to persist, which could prompt the CBR to ease its hawkish stance. As a result, it seems reasonable to anticipate slightly fas...