Starting the year in the red

Russia kicks off the year with a significant budget deficit, Deputy Finance Minister Vladimir Kolychev has warned. Weak oil-and-gas revenues as well as start-of-year advance payments are putting pressure on Moscow’s coffers from the off. But this year’s problems seem more intense than usual.

• Oil remains cheap and the finance ministry is already estimating a shortfall of about 230 billion rubles ($3 billion) in January alone, as revealed in its planned sales of gold and foreign currency between Jan. 16 and Feb. 5. “This year will likely repeat last year’s dynamics, but they will be slightly more acute because oil-and-gas revenues are even lower than last year,” Kolychev explained.
• The second factor is an acceleration of expenditure in the first quarter. The government typically pays out advances on state contracts in January and February. As a result, spending is concentrated at the start of the year, creating what is known as the so-called “optical deficit”—a lot of money is spent at once, but the tax take is spread out through the year. In January 2025, preliminary figures showed the budget was 1.7 trillion rubles ($22.4 billion) in the red after just one month—or 0.8% of GDP, against the 0.5% that was planned at the time for the entire year (though, contrary to that gap shrinking as the year went on, the deficit eventually came in at 2.6% of GDP). Advance payments are used to fix the previous problem of a massive budget overhang and surge in spending at the year-end. Now spending is weighted to both the first and last months of the year. So the first quarter of 2025 accounted for 24.5% of all spending, dropping to 20.2% and 19.5% in the second and third quarters. December spending was 1.6 times the monthly average for the rest of 2025, a much lower jump than in previous years. That weaker surge in December helped the finance ministry meet its final plan, adjusted throughout the year, for a budget deficit of 2.6% GDP, something many analysts had thought was in doubt.
• In 2026, the finance ministry’s main focus is on non-oil-and-gas revenues. In 2025, they were slightly higher than expected at 28.8 trillion rubles ($38 billion) against a forecast 27.9 trillion rubles ($37 billion). That was driven by tax changes and tighter enforcement. Exactly how much extra the finance ministry will secure from increasing the VAT rate to 22% this year will only become evident in the second quarter since receipts are paid quarterly, meaning a three-month data lag.

Why the world should care

Russia’s budget again starts the year in the red, oil-and-gas revenues remain under pressure with other tax payments lagging behind. Officially, the finance ministry is calm, but scenarios beyond its control could materialize, not least that the tax take may not increase as hoped and oil prices could stay too low to compensate.

French version edited by Marika Ruggiero, German version edited by Jan Möller