Image caption: Tuapshe Refinery in Krasnodar Region
Yana Sergeyeva, a special correspondent for Perspective Russia
Recently, the Russian government submitted the draft federal budget for 2024-2026 to the State Duma. Compared to the current plan, the government expects a significant increase in treasury revenue and expenditure over the next three years.
Russia will 'live within its means'
According to previous budgets, the fiscal revenue for 2024 and 2025 was 27.2 trillion rubles (approximately 269.3 billion US dollars) and 27.9 trillion rubles (approximately 276.2 billion US dollars), respectively. According to the latest forecast, the fiscal revenue for 2024 was 35 trillion rubles (approximately 346.5 billion US dollars), and the fiscal revenue for 2025 was 33.5 trillion rubles (approximately 331.6 billion US dollars), an increase of 7.8 trillion rubles (approximately 77.2 billion US dollars) and 5.6 trillion rubles (approximately 55.4 billion US dollars), respectively. According to data provided by the government, the national fiscal revenue will reach 34.1 trillion rubles (approximately 337.6 billion US dollars) in 2026.
According to reports, after the "blood transfusion" of economic development, the Russian Ministry of Finance, which plans to normalize budget policies, will adjust the revenue and expenditure components of the 2025 budget, and the country will begin to "live within its means". The revised 2024 budget expenditure structure reflects a new priority - military expenditure will significantly increase, accounting for 29% of total expenditure. This will not lead to an increase in the budget deficit, which is planned to account for 0.9% of the gross domestic product.
The rise in oil prices has gradually led to a recovery in the severely declining oil and gas revenue, and the recovery in commercial activities has also led to a significant increase in tax revenue, all of which have stabilized the fiscal situation this year. The budget deficit in the first eight months only accounted for 1.5% of the gross domestic product, so the Ministry of Finance is able to formulate a fiscal revenue and expenditure plan for 2024 with great optimism. Compared to this year (estimated at the time of the budget proposal), the fiscal revenue in 2024 will increase by 22%. The increase in expenditure will reach 5 trillion rubles (approximately 49.5 billion US dollars), totaling 36.7 trillion rubles (approximately 363.3 billion US dollars), which is not significant but also considerable.
Unexpected growth rate
It is worth noting that the Ministry of Finance will simultaneously reduce revenue and expenditure when formulating the 2025 budget. The Ministry of Finance explained that the expected revenue growth in 2024 is mainly due to changes in the tax base of the petroleum industry, depreciation of the ruble, and the implementation of "exchange rate" taxes. In fact, with a slight increase in GDP of 2.3% in 2024, both parts of the budget experienced such strong growth, which is indeed somewhat unexpected.
Alexander Arutneyan, Chief Economist of RussInvest Investment Company, stated: The Russian Bureau of Statistics has released a series of statistical data. Firstly, we have once again noticed that inflation is accelerating. Over the past period of time, consumer prices have increased by 0.28%, with a year-on-year increase of 5.74%. We firmly believe that the acceleration of inflation is the direct result of the significant depreciation of the ruble, which is a reflection of the federal budget deficit, deteriorating balance of payments, and withdrawal of overseas capital
Arutniyan also believes that Russia's industrial output increased by 3% year-on-year in the first eight months of this year. Overall, the recovery is still ongoing. At the same time, the business confidence index in August has decreased compared to the previous month, although the financial performance of various companies from January to July 2023 has exceeded the same period last year.
Compared to 2022 (with a high inflation rate of 7.5% and a significant depreciation of the ruble), the growth rate of various budget items in 2023 is much smaller. Among them, the revenue is 0.85 trillion rubles (approximately 8.4 billion US dollars), and the expenditure is 0.6 trillion rubles (approximately 5.9 billion US dollars). It should be pointed out that compared to this year, the main parameters of the 2024 budget will significantly increase.
This budget has increased the most
From the perspective of the Ministry of Finance, such a budget does seem very large, and this expansion will mainly come from the "military" expenditure items in the budget. From the budget submission, it can be seen that compared to the 2023 plan, the expenditure on "national defense" will increase from 6.4 trillion rubles (approximately 63.4 billion US dollars) to 10.8 trillion rubles (approximately 106.9 billion US dollars) next year. The increase in military expenditure will reduce the allocation of funds to parts closely related to the "national economy".
The proportion of economic related expenditures to total expenditures will decrease from 13.6% to 10.6% (from 4.1 trillion rubles to 3.9 trillion rubles, or from approximately $40.6 billion to approximately $38.6 billion). Previously, the largest proportion of expenditure was "social policies", but this time its proportion has also slightly decreased. Finance Minister Anton Siluanov stated that in the budget structure, "the focus is to ensure our victory, that is, the military, defense capabilities, armed forces, soldiers - everything necessary for these frontlines, everything necessary for victory, is included in the budget. He also said that due to the increase in the proportion of defense expenditure, the proportion of economic expenditure has indeed decreased, but in nominal terms, economic expenditure has not decreased, and infrastructure expenditure is increasing. A roughly equal increase in budget revenue and expenditure should not cause budget imbalance. This article was published in the Global Times "Perspective Russia" special issue, and the content was provided by Rossiyskaya Gazeta. ▲