Russia's state deficit could almost triple compared to the official target by the end of 2026 due to reduced oil purchases by India and increased discounts on oil trade, which reduces revenues, while expenditures could exceed expectations. A source close to the government told Reuters, writes UNN.
Details
According to the source, this is based on calculations by economists at a government think tank, which are not planned for publication. The data indicate increasing pressure on the Russian economy, which is facing sanctions, high interest rates, and a labor shortage.
The calculations showed a possible 18% drop in energy revenues in 2026 compared to the government's plan, leading to a deficit of 3.5% to 4.4% of GDP, compared to the planned 1.6% of GDP. An increase in expenditures of 4.1–8.4% is also predicted.
Total budget revenues are expected to decrease by 6% from the plan — to 37.9 trillion rubles (494.78 billion dollars).
The budget situation is sharply deteriorating. Revenues will be lower, and expenditures higher
Unless otherwise stated, the calculations of the government and the Central Bank of the Russian Federation usually proceed from the assumption of maintaining the status quo: the war in Ukraine, which is approaching its fourth year, will continue in 2026, and Western sanctions will remain in force.
The latest government data, published on Wednesday, showed that budget revenues from energy in January halved — to their lowest level since July 2020, amounting to 393.3 billion rubles (5.13 billion dollars).
The Russian economy, which relatively well withstood the first three years of the war, sharply slowed down last year due to the Central Bank's fight against inflation, which raised rates to their highest level since the early 2000s.
Western sanctions targeting the Russian energy sector and its customers have led to Russian oil trading at a discount of more than 20% to international benchmarks.
The ruble's 45% rally against the dollar last year also affected revenues, as oil taxes are calculated in dollars and paid in rubles.
The calculations were made before US President Donald Trump stated that he had convinced India to stop buying Russian oil, but the source noted that they were based on the assumption of a 30% drop in purchases by India, which remains valid for now.
The decline in revenues comes amid direct negotiations between Russia and Ukraine, mediated by the US in the United Arab Emirates this week, with all parties reporting progress towards a final settlement.
Russia has 4.1 trillion rubles in fiscal reserves that the government can use to cover the deficit, but analysts estimate that at the current rate of revenue decline, these reserves will be almost exhausted within a year.
The source noted that while the growing deficit and shrinking reserves will not lead to economic collapse, they will require a response from financial authorities.
"This is not a disaster. This is something that can be financed, but not at such interest rates," the source added, noting that the Ministry of Finance is likely to propose spending cuts, which would be a mistake during an economic slowdown.
Some assumptions in the current budget, such as the announced slight reduction in military spending, are "unrealistic," the source added.