Page 7 - bne IntelliNews Russia OUTLOOK 2025

personal income taxes and VAT, which together make up two thirds of Russia’s tax take, compared to oil and gas revenues, which accounted for 33% in 9M24.
While borrowing has increased, it remains modest. MinFin planned to raise RUB4 trillion on the domestic OFZ market, up from a pre-war average of RUB2.5 trillion, but government debt remains very modest and a pool of some RUB19 trillion of liquidity is still in the banking sector that can be tapped if needed.
Funds in the National Welfare Fund (NWF) halved in 2023 to some RUB4.8 trillion, which could have been used to fund a deficit of the order of RUB3.3 trillion in 2023, but in 2024 it appears MinFin has not needed to dip into the fund again.
The budget remains dependent on oil export tax revenues, but this dependence is also falling. While oil prices in 2025 are expected to soften, MinFin is also working hard to reduce the share of these revenues in Russia’s tax revenue to between 23% and 25% in 2025 from 33% in 2024 to further diversify Russia income away from its dependence on hydrocarbons. One of the ironies of the war in Ukraine is that it has forced the Kremlin to carry many long-overdue structural reforms.
While sanctions have failed as a tool to directly hurt the Russian economy, they have caused constraints that are fuelling deeper problems.
War outlook
The Russian economy is starting to feel the strains of the war in Ukraine, but the war itself is going well. In November The Armed Forces of Russia (AFR) took more territory in a month than at any time since the invasion began in 2022. Hundreds of square kilometres were captured after the front line had been largely static for almost two years during what Ukrainian General Valery Zaluzhnyi described as a stalemate.
However, these advances are coming at a great cost. In December the AFR was reportedly losing as many as 1,500 men a day, wounded or killed – five times more than the Armed Forces of Ukraine (AFU) defenders were losing.
The losses have put pressure on the Kremlin to raise fresh fighters through its voluntary recruitment programme. For most of 2024 the campaign has been going well, with between 30,000 and 40,000 new recruits a month – enough to replenish the losses at the front. However, as autumn arrived the number of fresh volunteers was starting to slow,
7 Russia OUTLOOK 2025 www.intellinews.com