Page 61 - RusRPTAug23

year.
On the one hand, this means that the new taxation system introduced by the government earlier this year—which taxed oil exporters not based on the Urals benchmark price but on a set (and gradually decreasing) discount from the Brent benchmark—failed to raise revenues significantly.
In addition, according to an estimate quoted in Russian state-owned media, losing European export markets will cost the Russian budget 2.6 trillion rubles ($28.8bn) this year. This roughly equals the official federal deficit accumulated in the first half of the year. As a reminder, the original deficit plan for the whole year was 2.9 trillion rubles ($32.1bn).
The government has so far spent 807bn rubles ($8.9bn) from the liquid part of the National Welfare Fund (NWF), Russia’s rainy-day fund to cover the deficit and boost investments. Barring a significant reduction of expenses, this spending will likely be accelerated in the second half of the year.
Gazprom’s falling fortunes will also result in higher domestic gas prices. The Federal Antimonopoly Service suggested a gas price hike of 8% in 2024 and again in 2025 (after a 8.5% raise at the end of 2022).
As for the lower-than-expected revenues, these are expected to lead to further cuts in public investments in the following years. Among the infrastructural development projects that could be downscaled or postponed are the Moscow-St. Petersburg high-speed railway and the so-called “Central Transport Hub,” which emerged from discussions at a strategic session of the federal government dedicated to infrastructure.
A new bill would give the regions the right to introduce tax breaks for companies that invest into initiatives for technological sovereignty and structural adaptation projects, but these tax breaks would reduce regional incomes. Additionally, the federal government reserves the right to determine which projects are supported. The Construction Ministry will also be taking more direct control of urban planning and construction in the regions (another win for Deputy Prime Minister Marat Khusnullin’s team).
As for regional ministries of economy, they are not going to stay without work; at least forty regions are reportedly establishing “Councils to Improve Citizens’ Quality of Life” to implement and improve social programs. This is certainly important for local authorities before an election year. However, experts quoted in a report by Govorit NeMoskva said that the new bodies will add very little to existing institutions, all while regional budgets are facing lean times and municipalities are losing control of their finances.
61 RUSSIA Country Report August 2023 www.intellinews.com