Page 12 - RusRPTOct22

2.2 Russian government slashes expenditure after largest revenue fall in 11 years
For the first time since the pandemic crisis, the Russian government is launching a large-scale sequestration of the federal budget, which experienced a collapse in revenues in the summer, which statistics have not seen since at least 2011, the Moscow Times reports.
Ministries and departments received a notification from the Ministry of Finance on a reduction in funding in 2022-2023. by 10%, Vedomosti reports, citing a source close to the Cabinet. According to him, the so-called "unprotected articles" will go under the knife, while there are no plans to cut the costs of pensions, salaries of state employees and the healthcare system.
The government is even going to increase the financing of the army, which is bogged down in the war with Ukraine: the state defence order program, which costs the budget about 2 trillion rubles a year, will remain at the same level, and another indexation is being prepared for military salaries. This will lead to an increase in overall military spending, explains a source close to the Ministry of Defence.
The sequestration of the budget, which was hit by sanctions, a recession in the economy and the strengthening of the ruble, is not a surprise, says Natalya Orlova, chief economist at Alfa-Bank.
Since the beginning of the summer, the government has been unable to balance revenues with expenditures, and the accumulated total for June-August received a deficit of 1.452 trillion rubles. As a result, almost all the "surplus" of money that had been accumulated in six months was spent by autumn: out of 1.589 trillion rubles at the beginning of June, only 131bn rubles remained by the end of August.
The budget is rapidly losing revenue under the pressure of sanctions and their consequences, Raiffeisenbank analysts write. Difficulties with the sale of oil to Asia and the shutdown of gas to European countries led to the fact that in July, oil and gas tax revenues collapsed by 29% yoy - a record for 11 years of available statistics. In August, they sank another 13%, to a minimum for 14 months (671.9bn rubles).
Fees from non-primary sectors of the economy fell in August by 14% in annual terms, to 1.157 trillion rubles. And the total budget revenues - by 10%, to 1.829 trillion rubles. At the same time, expenses increased by 8.4% year-on-year to RUB 2.174 trillion.
As the recession in the economy gains momentum, the treasury receives less and less VAT, customs duties and income tax. As a result, the government needs more and more expensive oil to make ends meet. The 2022 budget would be balanced if a barrel cost $105, Orlova estimates. In fact, oil companies receive almost 30% less - $74.4 per barrel of Urals in August.
12 RUSSIA Country Report October 2022 www.intellinews.com