Government expenditure in Russia increases despite the crisis

Abstract:

The governmental draft amendment to the budget for 2016 was submitted to parliament on 10 October 2016. The amendment reduces the average oil barrel price, on which the budget is based, to US$40/bbl. As a consequence, the planned budget revenue will be reduced by 370 billion roubles to 13.4 trillion roubles.

At the same time, the government has suggested increasing the level of spending by 304 billion roubles to 16.4 trillion roubles. Expenditure in the classified part of the budget (around 70% of this spending will be allocated to the defence sector) are to increase by 679 billion roubles, and unclassified expenditure will be reduced by 374 billion roubles. The money saved this way has been partly redirected, for example, to welfare policy (177 billion roubles). As a consequence, the share of the classified part of the budget in total budget spending will increase to 22.3% (from 20% in 2015). The budget deficit will also grow to 3 trillion roubles (around US$45 billion), i.e. 3.66% of GDP. The budget gap will be financed from such sources as loans on the domestic market, money from the Reserve Fund and revenue from the privatisations of Rosneft and Bashneft.