Page 89 - RusRPTApr24

The study sets strict progressive thresholds compared to leaks about the government’s plans - for accrued salaries of 30, 50 and 70 thousand rubles per month. Increasing the rate for them to 20% or 25%, respectively, “leads to a loss of 0.3 to 1.3% of GDP in the long run,” depending on other parameters. Redistribution in favor of citizens with low incomes does not increase aggregate consumption (minus 0.5–1.7%).
Even if we abandon the growth of personal income tax revenues and reduce the tax for the poor to 9.25% at the expense of the “rich” (which the government does not plan to do), long-term losses will range from 0.2% to 0.6% of GDP.
Researchers list other negative consequences of progressives - a decrease in incentives for more efficient workers to work, a long-term decrease in consumption, and a rapid offset of the positive effects for the poor due to rising prices through the marginal cost mechanism.
6.1.3 Budget dynamics - govt funding plans
OFZ are the main workhorse of the Ministry of Finance (MinFin) to fund the budget. In the near-zero global interest rate world pre-war they were very popular with international traders that could buy them directly from the Russian market after it was hooked up to the Clearstream international settlement system in 2012.
Russian OFZ paid a high interest rate of around 6%-7% pre-war, giving investors a decent return with low risk thanks to Russia’s rock-solid macroeconomic fundamentals, while interest rates of other major economies were close to zero as they battled rising global inflation. The yields on OFZ have grown substantially since then making borrowing costs much higher: bonds with a 20-year maturity carried yields of around 14% per year as of March 27.
International investors' share of the OFZ market peaked in February 2020 reaching 34.9% of bonds worth RUB3.2 trillion from a market worth RUB9.1 trillion but has fallen to 7.2% as of February.
MinFin has also halted its international borrowing programme, where it used to issue between $3bn and $6bn a year, less to raise money for the budget and more to simply set a sovereign benchmark so that leading Russian issuers could better price their own Eurobond issues. Corporates have also halted international bond issues as many were forced into default by sanctions in the first year of the war, unable to pay their coupons due to the SWIFT sanctions that were imposed only days after Russia’s invasion of Ukraine in February.
After the Russian budget went into deficit of RUB3.4 trillion in 2023 (1.9% GDP) and has also started this year with a deficit of RUB1.5 trillion (0.8%
89 RUSSIA Country Report April 2024 www.intellinews.com