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accelerated even more (to almost 60% from a year ago). The deficit of the federal budget was 64% of the deficit estimate of the budget approved for this year as a whole, which indicates a significantly larger deficit for the whole than budgeted (2%).
Despite the terrible January budget
results, MinFin is sticking to its 2% of GDP deficit forecast – the same as
last year’s – and appears to be confident that the events of last year will repeat themselves and the effects of the oil product embargo will be short-lived. As it transpired, MinFin's prediction of a 2% of GDP (RUB3 trillion) deficit turned out to be more or less correct and Russia ended 2022 with a 2.3% deficit, with almost all the negative results coming in
December alone. However, if the deficit trends in January persist then experts have said the deficit could come in at between RUB6 trillion to RUB9 trillion.
Even in the worst-case scenario
MinFin would be able to finance a RUB9 trillion deficit in 2023 with the RUB6.6 trillion in the National Welfare Fund (NWF) plus the planned RUB3.5 trillion issue of Russian Finance Ministry’s OFZ treasury bills that will tap liquidity pools in the Russian banking sector, but such enormous spending would exhaust
Russia’s reserves and probably lead to a financial and economic crisis in 2024.
Russia Ukraine war
2.3 Is Russia’s central bank printing money?
Russia last year saw a budget deficit of RUB3.3 trillion ($43.6bn), or 2.3% of GDP. This year, the Finance Ministry is planning for a deficit of 2% of GDP (RUB2.9 trillions) — but economists are doubtful that it can be achieved. Instead, they predict the deficit will come in at somewhere between RUB3.1 trillion and RUB6.9 trillions.
The authorities will close that hole by borrowing on the domestic market. The Finance Ministry is already issuing bonds, which are redeemed by the banks using money from the Central Bank. This looks a bit like new money and some economists suspect the Central Bank of printing money.
Last year’s budget deficit was only slightly less than at the peak of the pandemic in 2020 (RUB4.1 trillions). But, back then, the budget immediately bounced back to a surplus.
In the first months of 2023, however, there was little scope for optimism: in January alone, the deficit hit RUB1.76 trillions. According to Bloomberg’s Alexander Isakov, this year’s deficit could be as big as RUB6.9 trillion. Discussions are already well underway about how to plug that hole.
Russia last year covered the deficit by selling foreign currency from the National Wealth Fund (NWF) and issuing more OFZ government bonds.
19 RUSSIA Country Report Russia April 2023 www.intellinews.com