Russia’s budget deficit widens on higher spending

Russia’s budget deficit widened to 1.3% of GDP in the first two months of 2025, or 2.70-trillion roubles ($31.45bn), the finance ministry said on Tuesday, as government spending remained elevated.

The finance ministry puts this year’s early spending spree down to the advance payment of contracts that it said would not affect its target for a 2025 deficit of 0.5% of GDP.

Russia’s deficit for the first two months of 2024 was 1.13-billion roubles, or 0.6% of GDP.

For January-February 2025, spending was 8.05-trillion roubles, 30.6% higher year on year, the finance ministry’s preliminary data showed.

Budget revenues were 5.34-trillion roubles, up 6.3% year on year, led by non-oil and gas revenues, which climbed 11.1% to 3.78-trillion roubles.

Russia’s 2024 fiscal shortfall was about $34bn, or 1.7% of GDP. Spending has jumped in the last three years, with Moscow channelling funds into its military and defence sector as it prosecutes its February 2022 invasion of Ukraine, spurring stubbornly high inflation.

The central bank regularly cites huge fiscal stimulus as a factor that forces it to keep interest rates high.

When holding interest rates at 21% last month, governor Elvira Nabiullina said it was important that the government sticks to its plans for the budget deficit.

Reuters