A slump in oil exports to India and the need to sell it at ever-lower prices means Russia’s budget deficit could exceed its official target by three times by the end of 2026, Reuters reports.
A source close to the Russian government cited estimates by economists at a Kremlin-linked think tank, which are not intended for the general public. The estimates highlight the growing burden on the aggressor’s economy from sanctions, high interest rates and a labor shortage. It is estimated that, compared with 2026, energy revenues will be 18% lower than the government had planned, and the budget deficit will be between 3.5 and 4.4% of gross domestic product. The government had planned for it not to exceed 1.6% of GDP. Total budget revenues will be 6% lower than planned.
The source pointed out that the budget situation is deteriorating rapidly, with lower revenues and higher expenditures. The calculations of the Russian government and the country’s central bank basically assume that the situation will not change, the war in Ukraine will continue into 2026, and Western sanctions will remain in force. The latest Russian data released show that budget revenues in January fell to their lowest level since July 2020.
The Russian economy, which had been relatively healthy for three years despite the war in Ukraine, slowed sharply until last year. To combat inflation,
the central bank raised interest rates to levels last seen at the beginning of the millennium.
Western sanctions against Russia’s energy sector and its customers have forced Russians to sell their oil at a significant discount, even more than 20% below international prices.
The think tank’s calculations came before US President Donald Trump announced that he had persuaded India to stop buying Russian oil, but the source said they already factored in a 30% drop in oil exports to India. The budget revenue has fallen as Russian and Ukrainian officials meet in Abu Dhabi for US-sponsored talks on a possible ceasefire.
Russia has 4.1 trillion rubles in fiscal reserves, which the government could theoretically use to cover its budget deficit, but analysts have said that at the current rate of revenue decline, all of those reserves will be used up by the end of the year. The source said the growing budget deficit and dwindling reserves do not in themselves mean economic collapse, but will require action from financial institutions. He stressed that it is not a catastrophe, but added that the Finance Ministry is likely to push for spending cuts, which would be a mistake in a sluggish economy. Some of the assumptions in the current budget, such as the announced reduction in military spending, are unrealistic.
The Russian Finance Ministry declined to comment on the situation.
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