Russia's non-oil budget deficit falls to lowest level in nine years

By Ben Aris in Berlin June 9, 2017

Russia’s non-oil budget deficit this year will fall to its lowest level in nine years, Finance Minister Anton Siluanov said on June 9.

The non-oil deficit is the gap between spending and expenditure in the budget if you subtract out all the oil revenues from the government’s income. It is in many ways a better indicator of the health of the Russian budget than the headline federal budget deficit, which is expected to be 1.5-2% of GDP this year.

The government has always used its windfall oil tax revenues to subsidise spending and in the boom years the non-deficit was typically about -4% GDP. However, in the crisis years it can blow out to as much as 13% GDP as the government dips into its reserves to bail out struggling companies. Bringing the non-oil deficit back to around 4% GDP is a top finance ministry priority. Siluanov has revised the budget and is presenting the amendments to the State Duma.

“We see that reduced non-oil budget deficit, which is deemed non-oil and gas revenue. It speaks about the sustainability of our budget to the various extremes of external economic conditions,” Siluanov told the Duma, reports Vedomosti.

The non-oil deficit is expected to fall by 0.6 percentage points to reach 8.4% of GDP. “This is the lowest rate in the past nine years,” said Siluanov.

“Our goal is to reduce the impact of external economic conditions on the course of the execution of our budget. The indicator of the non-oil deficit needs to be 5-6% of GDP if we want to feel secure,” he added.

The total federal budget deficit in the project adjusted federal budget for the current year laid down in the amount of 2.1% of GDP. This rate also should be reduced: Siluanov said that during the formation of the budget at the end of last year, his ministry predicted a deficit of 3.2% of GDP for this year.

Last year, the ministry faced a crisis as, cut off from the international capital markets, it was struggling to finance the deficit. While Russia continues to run a federal budget deficit in 2017, thanks to the modest rise in oil prices the ministry is confident that it can finance the gap simply from tapping the domestic market and plans to issue RUB1.1 trillion of bonds plus another $3bn of new bonds on the international markets.

 

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