Russia’s deficit hit £46bn last month as sanctions batter Putin

RUSSIA’S budget deficit widened to hit record levels last month as sanctions hit oil export revenues and Vladimir Putin was forced to spend more on his invasion of Ukraine.

The fiscal gap reached a record 3.9 trillion roubles (£46bn) last month, according to Bloomberg calculations based on preliminary government data released yesterday.

That brought the full-year shortfall to about 3.3trillion roubles, reversing a surplus in the 11 months of the year.

Anton Siluanov, the Russian finance minister, later confirmed the full-year figure, which he said amounted to 2.3pc of gross domestic product (GDP), in a televised government meeting.

The preliminary data showed spending for the year was up more than a third compared with pre-war forecasts.

Before Russia launched its invasion on Feb 24 last year, it had targeted a state budget surplus of 1pc of GDP for 2022.

As recently as September last year, Mr Putin was predicting a surplus of close to half a trillion roubles.

Government expenditure in Russia is highly seasonal, with large spikes often coming at the end of the year, widening the deficit.

Income from high prices for oil, gas and other commodity exports in the first half helped offset rising spending, but that trend is now shifting. Prices for Russian oil collapsed after the G7 nations imposed a cap aimed at limiting the Kremlin’s earnings.

Mr Siluanov acknowledged late last month that the Western price cap could widen the budget deficit this year.

Mr Putin’s regime has already started cutting or delaying non-war spending and is discussing higher taxes for some big companies to help cover the shortfall.

Despite the pressures, Russia’s fiscal position remains strong, thanks to years of strict policies leading up to the invasion. The deficit this year is forecast at 2pc of GDP, in line with the 2022 level. But the forecast is based on an oil price of $70 per barrel, about $20 above levels seen in last month.