Russia’s federal budget revenues reached RUB3.4 trillion ($37.4bn) in April, up 6% year-on-year (y/y), while expenditures rose 12% y/y to RUB4.7 trillion ($51.7bn), according to preliminary Ministry of Finance data.

Notably, the federal budget posted a deficit of RUB1.3 trillion ($14.3bn) in April, widening the cumulative 4M26 deficit to RUB5.9 trillion ($64.9bn), or 2.5% of GDP.  This has already made 55% of the full-year budget target. 

As followed by IntelliNews, previously in March, the government boosted spending as it continued to bet on the windfall gains in oil and gas revenues as a result of the war in Iran. However, these gains fell short of forecasts in April.

FinMin reportedly continued to attribute the budget deficit to front-loaded spending at the beginning of the year.  The elevated spending levels to the “operational conclusion of contracts and advance financing of selected contracted expenditures,” according to the ministry.

Oil and gas revenues reportedly fell by 21% y/y in April, while non-oil and gas revenues increased by 20% y/y.

For 4M26 overall, the federal budget revenues declined by 5% y/y in 4M26. Oil and gas revenues fell by 38% y/y over the same period, while non-oil and gas revenues rose by 10% y/y. Federal budget expenditures increased by 16% y/y in 4M26 to RUB17.6 trillion ($193.6bn), equivalent to 40% of the approved annual target. 

Renaissance Capital analysts believe that the cumulative deficit could narrow in the coming months due to seasonal spending moderation in May and stronger commodity revenues. 

However, they warn that the elevated February to April expenditures and the stronger ruble make achieving a zero structural deficit by year's end unlikely. 

The analysts argue that the budget deficit remaining within the current budget law target of RUB3.8 trillion ($41.8bn), or 1.6% of GDP, is “improbable”, especially as FinMin reportedly plans to amend the budget only in autumn. 

As followed closely by IntelliNews, the Central Bank of Russia repeatedly warned the government against increasing spending. “Should the spending be higher and accompanied by a larger structural budget deficit, tighter monetary policy than in the baseline scenario would be required,” the CBR warned last month as it cut the key interest rate by 50 basis points (bp) to 14.5%.

Renaissance Capital also reminds that the CBR has identified the stronger fiscal stimulus as one of the factors limiting room for key rate cuts this year.