Russia will have budget deficit not exceeding 3% of GDP in 2026, Finance Minister says

By Darya Korsunskaya and Elena Fabrichnaya

MOSCOW, Sept 21 (Reuters) - Russia will have a budget deficit equal to 3% of gross domestic product in 2026, almost double the plan and more than last year, Finance Minister Anton Siluanov said on Monday as the government prepares to review the draft of the 2027 budget this week.

Russia hiked taxes this year to cope with the rising expenditure to finance the military action in Ukraine, hoping to reduce the budget deficit to 1.6% of GDP from 2.6% in 2025, but the current deficit in January-August already stands at 2.5% of GDP. 

"Certainly, during the execution of the budget, additional needs for funding and expenditures have arisen. Additional sources of funding for these expenditures will be provided for this purpose," Siluanov told Russian state television. 

This year, Russia had to boost its air defences as Ukraine carried out successful drone attacks on economic infrastructure such as refineries, ports and e-commerce warehouses, as well as spending on measures to ease nationwide fuel shortages.

The deficit this year rose despite increased revenues from export of oil as global prices rose on the war in the Middle East as well as a weakening rouble, which generally helps the budget, inflating state revenues from exports.     

Siluanov said that the government will plan to borrow more than the initially planned 5.5 trillion roubles ($65.7 billion) and use some leftover funds from previous years to finance the deficit. He said that additional borrowing by the state did not pose risks for the financial system. 

President Vladimir Putin said last week that the deficit for 2027 is expected to fall to about 2% and that he expected oil and gas revenues to increase in the coming months. Siluanov said that such a deficit would create room for further easing of monetary policy.  

"The main thing is that we have coordinated with the central bank. What is important today? It is important that our inflation, inflation expectations, and interest rates fall," Siluanov said. 

Russia has a low overall state debt but servicing costs have been increasing due to high interest rates. The central bank, which had mentioned the budget situation as one of the factors in its rate-setting decisions, said on Monday the current deficit projections were in line with its expectations. 

Siluanov said that fiscal reserves at the National Wealth Fund, whose gradual depletion was seen by analysts as one of the key risks for the budget, will rise by between 600 billion and 1 trillion roubles to 5 trillion roubles by the end of 2026.

($1 = 83.7455 roubles)

(Writing by Gleb Bryanski; Editing by Toby Chopra)