Putin has reported problems with the budget due to the collapse of oil and gas revenues

Fulfilling the Russian budget is facing “problems,” Finance Minister Anton Siluanov said during a Wednesday meeting with Russian President Vladimir Putin.

“Non-oil and gas revenues are growing as planned. We expect even a slight plus at the end of the year. But there are problems with oil and gas revenues,” Siluanov said.

According to the Ministry of Finance, in January-April, tax revenues from oil and gas fell by half, to 2.3 trillion rubles, and total revenues – by 22%, to 7.8 trillion rubles. Budget expenditures turned out to be 1.4 times higher than revenues, as a result of which a “hole” of 3.4 trillion rubles had formed in the treasury by the beginning of May.

Revenue from the sale of goods lags behind plan due to “market conditions” and discounts that oil companies have to give buyers, Siluanov explained. However, the imbalance is “temporary” – he assured the president – the revenue plan was implemented in 30% and expenditure in 39%, but this gap will be eliminated in the coming months of the year.

There should be no problems with filling the budget, Putin replied to the minister. Russia has been voluntarily reducing oil production since April, specifically to reduce discounts on the Urals, which reached $35 a barrel or more in the winter.

“All our actions, including those regarding voluntary production cuts, are related precisely to the need to maintain a certain price environment on world markets in dialogue and contact with our OPEC+ partners,” Putin said.

According to the Ministry of Finance, the average price of the Urals rose by 23% in April and exceeded $58 per barrel. Despite this, the decline in oil and gas revenues accelerated to 64% yoy from 43-47% in January-March.

The Budget Act provides for a budget deficit of 2% of GDP. GDP, or 2.9 trillion rubles, but in reality the “hole” may be twice as large – 4 percent. GDP – predicts Yegor Susin, managing director of GPB Private Banking. Finam and BCS estimate its size at 4-5 trillion rubles.

To stay on schedule, the budget will have to cut spending below last year’s levels for the remaining eight months, says Alexander Isakov, Russia and CIS economist at Bloomberg Economics.

In the face of increased defense spending due to the war with Ukraine, and on the eve of the presidential election scheduled for 2024, when money is traditionally distributed to the poor electorate, it will be difficult, the expert notes.