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Friday, March 24, 2023

A record hole has formed in the Russian budget

According to the January results, the Russian budget showed a record deficit of 1,760 billion rubles (more than 25 billion US dollars). This follows from the statistics released the day before by the Ministry of Finance of the Russian Federation.

According to experts, this has not happened since at least 1998.

The department itself partly explained the formation of such a huge hole by the costs associated with the transition to a new tax collection system – the single tax account.

At the same time, the Ministry of Finance acknowledged that the decline in oil and gas revenues increased by 46% compared to the same period last year. This is connected with a drop in Urals oil prices and a reduction in gas exports.

Last year, Russian gas supplies to Europe fell to their lowest level since 2000, according to Reuters.

In turn, the increase in budget expenditure by almost 59% (3.1 trillion rubles) was explained by the Ministry of Finance by the timely conclusion and early payment of contracts, without going into details.

“The only thing that saves now is the issuance of unsecured money”

Publicist and economist Maxim Blunt, in an interview with the Russian service media, explains the deplorable state of the Russian budget for several reasons. First, according to him, it is proof that Western sanctions work and that they are effective.

“A huge budget deficit also formed due to the fact that spending was almost one and a half times higher than in January last year,” he added. – And income decreased by about one and a half times. The drop in income is caused, on the one hand, by the fact that after the outbreak of the war, Russian oil began to be sold at an increasingly lower price. And on December 5, when the ceiling price for offshore oil supplies entered into force, the price of the Urals brand, at which all budget allocations are calculated, fell by about 70%.

In addition, revenues fell as the Ministry of Finance at the end of last year “scraped taxes to the maximum from all, to whom it was only possible and to whom it was impossible”, underlined Maxim Blunt. According to him, it is no longer possible to repeat the trick: companies simply have no more money.

“In short, war is an expensive business, and contingencies come like hell out of a snuffbox,” he continued. – It’s just that there is no advertising, which is easier to do in Russia. But it’s still an open secret. Here, the Ministry of Finance explains the growth in expenditure by the fact that at the start of the year a large number of contracts were signed and numerous advances were paid. And modestly silent that it is related to “the defense industry”. And there everything is opaque to the maximum.

It will only get worse, says the economist. And the main question here, in his opinion: where does the Ministry of Finance get the money for all this?

“The National Wealth Fund (NWF) explanations are totally untenable,” he said. – The Ministry of Finance sold all the funds stored there in foreign currencies, including the yuan, but earned only 54 billion rubles. And the budget deficit, as we remember, in January alone amounted to 1.76 trillion rubles. It’s a whole different order of numbers. Then they sold more gold – over three tons. That’s about 15 billion more, obviously the rest of the money was just printed.

Therefore, the Department of Finance is “spending what is not”, says Maxim Blunt: “The fact that it will look exactly like this was clear last year. The budget already then did not correspond to any reality. We must therefore say goodbye to public finances. The only saving grace now is the unsecured issue of money. As soon as people, companies, the financial sector realize that this is already a fact, I think there will be a panic comparable to that which took place at the beginning of the war. It is clear that the problem will lead to higher prices or shortage of products. »

On February 5, the Western embargo on Russian petroleum products entered into force, the economist recalled. Going forward, this is another additional source of dwindling budget revenue, he concluded.

“There is no way to close the budget hole”

Oleg Buklemishev, president of the Association of Independent Centers for Economic Analysis, is convinced that such a large budget deficit is mainly caused by rising costs and, to a lesser extent, falling revenues. It seems to him that the Russian economy simply cannot afford such expenses.

“Judging by information from the Institute for Peace Studies in Stockholm, Russia was already in 2021 ahead of the United States and China in terms of the share of defense spending in GDP,” the Commission said. source from media. – That is, we quickly return to the history of the Soviet Union. And this (such expenses) is absolutely beyond the power of the modern Russian economy and, accordingly, the country’s tax system.

According to official data, Russia’s arms expenditure in pre-war 2021 amounted to 65.9 billion. This represents 4.1% of GDP, or 2.9% more than a year earlier. At the same time, there are many closed items in the Russian budget, so it is impossible to measure the real scale of spending in the military sphere.

Meanwhile, the president of the Association of Independent Centers for Economic Analysis agrees that falling oil and gas revenues also played a role in creating a hole in the budget. “But here I would rather focus on the fact that the price cap worked (on the supply of Russian oil by sea), he clarified. – And on the fact that under the influence (of events ) of the whole last year and many other factors, the Russian oil trade is going into the “shadow”, in many ways is becoming the shadow. Such processes are much more difficult to tax. It is not known the prices at which transactions take place, nor that in whose pockets the income is deposited.It is clear that in such regimes, the lion’s share of the income comes out of the budget.

Also, Oleg Buklemishev expressed doubts that the Ministry of Finance of the Russian Federation would be able to get out of the situation. “If we continue in the same spirit, then there is no way to plug the budget hole. We can talk about different combinations of solutions, but all of them will be purely temporary, opportunistic, and there is no long-term, lasting solution for them. And just forget about the ‘pod’ in the form of the National Welfare Fund, there is no more ‘pod’ in sight,” he concluded.

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