Russia’s public budget deficit could reach between 3.5% and 4.4% of gross domestic product by the end of 2026, nearly three times the official target of 1.6%, according to calculations seen by Reuters from economists at a government-linked think tank. The projections attribute the worsening fiscal outlook to falling energy revenues, growing discounts on Russian oil, and potential increases in government spending. Total budget revenues are expected to decline by 6% from planned levels to 37.9 trillion roubles ($494.8 billion).
The think-tank estimates assume a roughly 18% drop in energy revenues compared with government forecasts, largely driven by reduced Indian oil purchases and continued discounted sales caused by Western sanctions. The Russian Finance Ministry did not comment on the projections, which broadly align with analyses from commercial banks and research institutions. A source close to the government, speaking anonymously to Reuters, said the budget deterioration “is not a catastrophe” but will require active management by financial authorities, warning that proposed spending cuts could exacerbate the slowdown in the economy.
Russia’s economic pressures have grown as high interest rates, labor shortages, and sanctions take their toll. January budget data revealed energy revenues had halved from previous levels, marking the lowest inflows since July 2020. Analysts note that ongoing military spending, combined with assumptions of continued conflict in Ukraine and persistent sanctions, will further strain fiscal reserves, currently totaling 4.1 trillion roubles. Estimates suggest that at the current pace of revenue decline, these reserves could be largely depleted within a year.
Oil trading at more than 20% below international benchmarks, a rouble rally, and falling Indian purchases are all contributing factors to the shortfall. Deputy Prime Minister Alexander Novak emphasized the importance of maintaining budgetary balance as a shield against sanctions, calling it “one of the key foundations for maintaining the stability of our finances and our economy.” Meanwhile, Russia continues U.S.-mediated talks with Ukraine in the United Arab Emirates, with officials indicating progress toward a potential settlement. The looming fiscal gap underscores the challenge facing Moscow as it balances economic pressures, sanctions, and geopolitical commitments, Reuters notes.
