BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/41
Under the amendment and according to prime minister Dmitri Medvedev, spending rises and redirection of existing spending will allocate more money to the National Pension Fund and other priority spending areas. The proposal apparently includes a substantial increase in defence spending.
Lower-than-expected oil prices have reduced federal budget revenues. This year’s budget initially assumed that the price of Urals-grade crude oil would average $50 a barrel this year. The average price this year has been about $40. The spending increase means that the federal budget deficit will widen this year to 3 trillion rubles (€43 billion), or 3.7 % of GDP (original deficit ceiling 3 %). The deficit increase is planned to be covered through e.g. increasing domestic debt and divestment of stakes in state-owned enterprises. Most of the budget deficit, of course, will be funded out of the Reserve Fund, but in the amendment there are no propositions to increase the amount of planned withdrawals this year.