Jan-Feb figures from the Russian Ministry of Finance indicate that the Russian federal budget is running a deficit at the pace of 10% of GDP.

This is a relative improvement over January, when the annualized deficit was running at the pace of 13.7% of GDP. However, it is consistent with the numbers since Q3 2022, when our analysis showed the Russian budget in a deficit of 10% of GDP, as now.

On the revenue side, the chief culprits is oil and gas revenues, down 46% compared to the same period last year. Meanwhile, expenses related to state procurement, including the funding of the war, are up 52% compared to Jan.-Feb. last year. The result is a large deficit, compared to a modest surplus last year. Anecdotal information, notably reports of delayed, partial and missing payments to Russian soldiers in Ukraine, are consistent with a shortage of cash in Kremlin’s coffers.

This current deficit is large, but not unexpected for a country in the middle of a major war and struggling with associated sanctions.

As before, Russia may be expected to cover most of the deficit by draws from its sovereign wealth fund, which should see it through 2023.