Russia's budget deficit surges despite high oil revenues – Bloomberg

During the first seven months of the year, Russia’s cumulative budget deficit reached 6.5 trillion rubles ($78.7 billion), equivalent to 2.8% of the GDP.

The situation is worsening due to rapidly rising government spending. In the first seven months of the year, Russia’s total budget expenditures reached 28.6 trillion rubles ($346.2 billion). Spending on government procurement increased the most, surging by 39% to 8.4 trillion rubles ($102 billion), already exceeding 80% of the annual plan.

The Russian government continues to make advance payments under state contracts, while officials have been formally allowed to increase spending without amending the budget law.

The Kremlin is increasing military spending as the economy slows amid high interest rates, which the authorities are using to curb inflation.

Oil revenue situation

Meanwhile, in July, Russia's total budget revenues grew by 28% compared to last year ($11.3 billion), while oil and gas revenues amounted to 934 billion rubles ($11.3 billion).

Russia received additional revenue from rising global oil prices amid the conflict in the Middle East and tensions in the Strait of Hormuz, as well as from cuts to government subsidies for domestic oil refineries.

Bloomberg reports that Russia’s oil tax revenues reached their highest level in 15 months, while prices for Russia’s Urals crude remain above the average level assumed in the budget.

Earlier, Russian President Vladimir Putin began publicly emphasizing the role of the Russian government and society in supporting the war against Ukraine.

The Institute for the Study of War (ISW) believes that the Kremlin may gradually be shifting part of the responsibility for the war onto State Duma lawmakers and Russian society.