The Russian government is preparing a possible 10 per cent cut to all “non-sensitive” spending in this year’s budget, sources told Reuters, but the final decision will hinge on the sustainability of the oil price rise triggered by the Iran war.
As the war in Ukraine enters its fifth year, Russia is facing a double whammy of falling budget revenues from energy sales and of an economic slowdown, which affects tax income from other sectors of the economy. The government is planning to divert more money into the budget reserve fund to prevent it from potential depletion. The measure could be accompanied by a corresponding cut in spending.
“The Finance Ministry has informed agencies distributing budget funds that there is a need to cut spending. They are now sitting around thinking what to cut,” said one of the sources. Two of the four sources close to the government, who are privy to the Finance Ministry’s communications, mentioned the 10pc reduction, while the other two said the cut is being discussed without specifying the figure.
The Finance Ministry told Reuters in comments on this story that it is discussing measures to prioritise budget spending with other ministries. Andrei Gangan, head of the monetary policy department at the central bank, said an optimisation of spending can only be welcomed.
The ministry added that decisions will not affect spending on what Russia terms its “special military operation” in Ukraine or social obligations to Russian citizens, but will help to avoid increasing debt and to retain long-term stability of state finances.
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