Moscow Is Cutting Spending Amid A Shortage Of Funds In The Treasury

Russia's budget deficit has already reached 6.5 trillion rubles.

Russian authorities were forced to sharply cut government spending after the federal treasury faced a shortage of liquid funds in the spring, according to Bloomberg.

In April, the balance in the Russian government’s consolidated account turned negative for the first time, reaching minus 5.5 trillion rubles. Finance Minister Anton Siluanov warned Prime Minister Mikhail Mishustin that there might not be enough money to meet obligations on time.

In response, the authorities implemented strict austerity measures. Funding for non-priority government programs was cut by approximately 35%, and government agencies were instructed to prepare for a 15% staff reduction and to postpone non-urgent expenditures.

However, key budget items were not affected. First and foremost, Moscow continues to fund the war against Ukraine, pay salaries to civil servants and military personnel, fulfill social obligations, support the regions, and service the national debt.

Russia’s budget deficit has already reached 6.5 trillion rubles, or 2.8% of GDP, whereas the authorities had initially expected to keep it at 1.6%. According to internal estimates, the situation will not improve significantly by the end of the year, and by 2027, the deficit could rise to 3.2–3.8% of GDP.

“The liquidity crisis has exposed the mounting costs of the war,” writes Bloomberg.

To make up for the shortfall, the Russian government is increasing domestic borrowing and has streamlined the procedure for raising spending. At the same time, austerity measures have helped prevent an even sharper rise in the deficit: in April, it was estimated at 9 trillion rubles.

Despite the financial pressure, Russian authorities believe there will be enough money to continue the war for several more years. However, the growing deficit and the need to constantly seek new sources of funding indicate that the strain on the budget continues to increase.

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