Russia reports a deficit of $47 billion for 2022

Strained by the need to fund its war machine, Russia’s government announced on Tuesday that it was running a budget deficit of $47 billion in 2022, the second-highest since the collapse of the Soviet Union.

The budget gap will reach 3.3 trillion rubles in 2022, or 2.3 percent of the size of Russia’s economy, Anton Siluanov, the country’s finance minister, said during a government meeting on Tuesday.

Russia’s revenue rose by 2.8 trillion rubles, or $40 billion, in 2022, but that wasn’t enough to meet rapidly rising spending, which skyrocketed by 6.4 trillion rubles, or $92 billion, officials said.

At the meeting, government officials presented the economic situation as positive, with Mikhail Mishustin, Russia’s prime minister, saying that “overall, these indicators are not bad”.

Without explicitly referring to the war, Finance Minister Silanov said: “Despite the geopolitical situation, restrictions and sanctions, we have achieved all of our planned goals.”

Still, the reported deficit for 2022 is the second largest in post-Soviet Russia’s history after that for 2020, the year the coronavirus pandemic began to spread.

Immediately after the Russian invasion of Ukraine, many experts predicted a catastrophic collapse of the country’s economy due to Western sanctions and other restrictive measures.

However, the Russian economy developed better than expected, supported by high commodity prices. And some sanctions, such as a $60-per-barrel cap on the price of Russian oil, were introduced later in the year, mitigating their impact on the economy.

The Russian government hasn’t released a detailed breakdown of its spending in 2022, but it’s widely believed that most of the increase is due to increased military spending. The government was forced to fund the deficit by issuing bonds and using money from its Rainy Day fund.

A high deficit is also expected for this year. Russia plans to increase its military spending by a third, and Moscow’s oil revenues are expected to come under pressure from the oil price cap, which will force Russian traders to sell crude at discounts.