Russia: 2015 Budget
Published 29 September 2014
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Summary
The Russian government approves a draft budget for 2015. As a result of the economic slowdown and falling oil price, 700 billion roubles (£11 billion) of previous spending plans have been cut back, and 300 billion (£5 billion) of new revenues have been identified. The budget forecasts a deficit of 0.6% of GDP next year, based on average oil price of $100.
Detail
On 18 September, the Russian government approved a draft federal budget for 2015, which it must present to the State Duma by 1 October for agreement.
The economic slowdown and the lower oil price have left a hole of around one trillion roubles (approximately £16 billion) in the previous 2015 budget plan, which was agreed in 2013. Russian policymakers remain reluctant to increase levels of government debt: last week, Deputy Prime Minister Dvorkovich said that international borrowing constraints made it “more important than ever” that Russia lived within its means. Therefore, the Finance Ministry developed proposals to find the additional one trillion by removing around 700 billion roubles (approximately £11 billion) of previously-planned expenditure and identifying around 300 billion roubles (approximately £5 billion) of new revenues.
Full details have not yet been released, but reports suggest that previous spending plans for healthcare, social insurance and transfers to the pension fund will be cut back. New revenues are expected to come from increased taxes on online commerce, tobacco and alcohol, new export duties on Gazprom’s exports via the Blue Stream pipeline, and the sale of a further 19.5% stake in state oil company Rosneft.
With these amendments, the budget forecasts a relatively modest deficit of 0.6% of GDP next year. However, this assumes growth of 1.2% in 2015 (previous plans had forecast 3.1%) and an average Urals oil price of $100/barrel (previous plans had been based on $105/barrel). The Finance Ministry has stated that if revenues are less than predicted, it will dip into the Reserve Fund to meet the 0.6% deficit target.
Plans for defence spending have escaped untouched. The military budget is still expected to rise over 20% next year, as part of a 85% increase between 2012 and 2017. However, Finance Minister Siluanov said on 19 September that the Russian military would “eventually have to optimize and reduce its share”.
In addition to proposed amendments to the budget, the government has agreed to use part of the National Welfare Fund (NWF) to buy bonds from Russian companies which have been targeted by sanctions and which are therefore unable to raise finance on international markets.
During the government’s meeting on 18 September, Prime Minister Medvedev said that the 2015 budget had been the most difficult he had worked on. The economic slowdown had been “exacerbated by the implementation of sanctions on individual sectors of the economy”, which meant that an “already tight” budget had to be adjusted further.
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