Russian government wins right to change debt, spending plans with no public hearings

MOSCOW, June 10 - Russia's parliament on Wednesday voted in favour of a law that enables the government to increase spending and debt without the lengthy process of amending the budget law, which in previous years took months to complete.

In the first five months of the year, Russia ran a budget deficit of 2.6% of gross domestic product, above an annual target of 1.6% of GDP, due to increased military spending to sustain the war in Ukraine.

The Finance Ministry said the rise was due to advance payments on state contracts.

"The bill gives us greater flexibility to manoeuvre quickly in changing conditions, which is necessary so that we can respond to changes that are now occurring not every month or quarter, but virtually every day," Deputy Finance Minister Irina Okladnikova said.

The new legal changes enable the government to borrow above the limit set in the budget law and increase spending. Previously, the government had to amend the budget law and go through parliamentary hearings, which delayed the process.

The changes also imply that changes to the debt and spending plans will no longer be made public.

Finance Minister Anton Siluanov said last week that the 2026 deficit will be larger than planned, but the increase in borrowing will not be as big as last year, when it grew by 46% to 7 trillion roubles. This year, borrowing is planned at 5.5 trillion roubles.

Russia’s financial position has been deteriorating, with the government forced to raise value-added tax this year to cope with rising military spending.

However, higher prices for Russian commodities due to the war in the Middle East have given the government some breathing space and led to a postponement of spending cuts that were discussed in February before U.S. and Israeli strikes on Iran.

The Finance Ministry has shifted its target for reaching a primary budget balance, which excludes debt servicing costs, to 2029, which the central bank said could slow the pace of rate cuts badly needed by the slowing economy.

(Reporting by Darya Korsunskaya; Writing by Gleb Bryanski; Editing by Jan Harvey)