Is it really bad? Russia will significantly cut budget expenditures

Reuters: the Russian government is preparing to cut budget expenditures by 10%.

The Russian government is working on a plan to reduce all non-essential, "non-sensitive" budget expenditures by 10%, Reuters reports, citing sources, as quoted by Meduza.

"The Ministry of Finance has informed the agencies distributing budget funds about the need to cut expenditures. They are currently discussing what exactly to cut," one of the agency's sources stated. Some sources mention a 10% reduction, while others say that the size of the cuts has not yet been approved.

The ministry itself confirmed to journalists that they are discussing measures "to prioritize budget expenditures" with other ministries. The Ministry of Finance stated that the cuts will not affect military and social expenditures. According to anonymous sources from Reuters, social payments and salaries for budget-funded employees will also not be affected by the cuts.

"This is always done by optimizing non-essential expenditures. Some new projects will be suspended, such as the construction or repair of roads," noted one of the agency's sources.

Part of the freed-up funds is intended to be directed to the National Wealth Fund to avoid its possible depletion, the article states.

The final decision on the cuts plan will depend on the oil price established amid the war between Israel and the United States and Iran. According to one of Reuters' sources, the current budget situation requires expenditure cuts regardless of short-term fluctuations in oil prices.

According to the government's plan for 2026, the budget deficit will be reduced to 3.8 trillion rubles, and in 2027 it will amount to 3.2 trillion rubles. The deficit is planned to be covered by funds from the National Wealth Fund, external and internal borrowings, as well as tax increases.

In the first two months, Russia's budget collected only 826 billion rubles in oil and gas revenues — this is 47% less than a year earlier, writes The Bell. The shortfall from the planned figure amounted to 335 billion rubles.

The Russian budget is under pressure also due to the decline in oil and gas revenues. Several factors influence them — low oil prices, oversupply of raw materials worldwide, a strong ruble, and sanctions.

Amid the war in the Middle East, Russia may benefit from increased oil and gas revenues due to rising prices and the reorientation of China and India towards Russian energy resources.