Page 55 - RusRPTAug20

which includes non-indexation of state officials’ wages, 10% cuts to dozens of budget items and 5% cut to state armament program.
In a de facto budget sequestration, first since 2016, Russian government plans to cut spending in nominal terms from the high base of 23 tn Rub in 2020. It raises questions about abrupt discontinuation of fiscal stimulus when the economy is still weak.
A 5% planned cut to state program of weapons purchases for 2021-2023 is a symbolic move, unprecedented for recent history. According to experts’ estimates, FinMin could save some RUB225bn in 3 years through reduction of state’s weapons buying.
For the May-June period, federal budget revenues from oil & gas production taxes and export duties on oil, gas and oil products hit a record low​, down almost 70% y/y.
In the 2009 and 2015 recessions, oil & gas revenues were off by 40–50% at most. World oil prices hit bottom in April, seriously reducing oil & gas tax revenues for May-June as the delayed impact from the price drop hit budget revenues. Oil prices in the second quarter were down by more than 50% y/y. The relatively slight depreciation of the ruble’s exchange rate cushioned to a rather small degree the fall of the oil price in rubles that came at 50% from a year earlier.
Other than oil & gas federal budget revenues declined by 15% y/y in the second quarter, but were roughly unchanged on-year for the first half if we exclude the CBR’s large transfer (to the federal budget) of this year’s part of the surplus the CBR gained from the government’s payment for the majority of Sberbank shares. With the CBR transfer, first-half growth in revenues other than from oil & gas taxes was nearly 20% y/y. Value-added tax revenues took a notably small hit in the second quarter, dropping by 5% y/y, and were essentially unchanged in the first half compared to 1H19. VAT, which currently provides the federal budget’s single largest revenue stream, has seen its share in total revenues rise to around 40% this year.
Total federal budget revenues without the CBR’s Sberbank surplus transfer were down roughly 15% y/y in the first half. In the second quarter, however, the on-year decline was around 33%. The CBR transfer softened the decreases numbers to about 5% and 10%, respectively.
Budget spending, on the other hand, has soared. Expenditure growth reached almost 40% y/y in 2Q20, raising the growth rate for the first half of the year to
55​ RUSSIA Country Report​ August 2020 ​ ​www.intellinews.com