Russian parliament passes 2016 federal budget with 3% deficit

By bne IntelliNews December 4, 2015

The lower house of the Russian parliament, the State Duma, passed the 2016 federal budget with a 3% GDP deficit in the third and final reading on December 4, with a comfortable majority of 297 votes for the draft and 149 against.

The government approved the budget in October after switching to "manual control" mode in fiscal planning. As of 2016, it will resort to one-year budgeting instead of three years, and abandon the budget rule benchmark setting the average oil price for capping expenditure levels, in view of the turbulence on the global oil market.

Fiscal adjustments in the new budget include a higher tax burden on large oil companies, the continued freezing of pension accumulations, and slowed indexation of age pensions and public salaries. Military spending remained intact and was adjusted upwards on the last days of budget drafting.

Spending is budgeted to decline by 0.5% y/y in 2015 to RUB13.74 trillion ($202bn at current rates, or 17.5% of GDP), and to RUB16.1 trillion ($237bn, or 20.5% of GDP), respectively.

The budget assumes a $50/barrel average oil price for 2016, average inflation not exceeding 6.4%, and nominal GDP of RUB76.67 trillion.

The 3% budget deficit will be financed by tapping the Reserve Fund, which is projected to decline from RUB3.4 trillion to about RUB1 trillion in 2016.

The government also plans to borrow both domestically and abroad, with net domestic borrowings amounting to RUB300bn ($4.4bn) and net foreign-currency nominated borrowings of $1.47bn.

Related Articles

Azerbaijan's Aliyev, Russia's Putin hold surprise meeting in Sochi

Azerbaijani President Ilham Aliyev and Russian President Vladimir Putin held an unannounced meeting in Sochi on July 21, according to RIA Novosti press agency. The two heads of state reportedly ... more

Siemens fumes as worst suspicions on Crimea turbines confirmed

German technology major Siemens said on July 21 it has "credible evidence" that all four gas turbines supplied for a power plant in the south of Russia were locally modified and illegally supplied ... more

Azerbaijan jails Russian blogger for three years for Nagorno-Karabakh visit

A Baku court sentenced Russian travel blogger Alexander Lapshin to three years behind bars for having ... more