Page 71 - RusRPTNov20

With revenue recovery and expenditure restraint, the deficit is expected to decline to 3% of GDP in 2021 and less than 1.5% of GDP in 2022.
Government wages will not increase next year, and in the next two years the increases will be in line with inflation. Pensioners who are not working will receive an annual increase of around 6% in their pensions, in line with the 2018 decision.
In key sector-specific expenditure items, growth in health care and social assistance expenditure will be pressed very slowly next year. Defence spending will decline after rising last year and this year.
This year’s deficit will be financed almost entirely by borrowing mainly domestically. From next year onwards, the planned increase in the debt deficit is largely due to the fact that, in accordance with the budgetary rule, oil and gas tax revenues will start to shift again to savings and continue to be transferred to the National Welfare Fund, which will act as a reserve fund.
Government debt is growing, but is estimated to be around 21.5% of GDP at the end of 2023. The total assets of the reserve fund are projected to remain relatively unchanged in 2021-2023, ie at around 10-11% of GDP, and the liquid assets of the fund at around 7% of GDP.
6.1.3​ Budget dynamics - govt funding plans
How will MinFin cover the 2.4% GDP deficit planned for 2021? ​The primary source of financing is to be net debt issuance – but MinFin guides that next year net issuance will decline from RUB4.4 trillion in 2020 to RUB2.9 trillion in 2021 and then further to just RUB2.1 trillion in 2022 as the whole budget becomes aligned with the pre-COVID version of the Fiscal Rule. Does MinFin plan to issue externally in the coming years? Yes, MinFin’s plan almost shows plans to issue $3bn per year in the coming three years (even as MinFin claims to assume that the current external financial restrictions will persist), but we note that this is not a binding commitment – MinFin can and does choose depending on the perceived market conditions.
71 ​RUSSIA Country Report​ November 2020 www.intellinews.com