The Russian Budget Blocked It Back in January

Russia’s federal budget deficit for January was 17%, or 252 trillion rubles, the Russian Ministry of Finance announced. According to official data, spending exceeded income by 1.72 trillion rubles, or 0.7% of GDP. In January 2025, the deficit was 1.47 trillion rubles.

Revenues in the budget in January fell by 11.5% on an annual basis, which was mainly due to the reduction of revenues from oil and gas.

This year, the authorities planned to reduce the budget deficit to 3.8 trillion rubles, or 1.6% of GDP, mostly at the expense of another increase in the tax burden on businesses and the population. Since the beginning of the year, VAT has been increased from 20 to 22%, and a number of reliefs for businesses have been cancelled.

However, these plans risk failure. The price of Russian oil is much lower than the 2026 budget of $59 per barrel, and GDP growth is unlikely to reach even the modest expectations of the authorities.

Last year, the budget deficit exceeded by almost five times the initial targets and became a record since 2020 in percentage ratio to GDP – 5.7 trillion rubles, or 2.6% of GDP.

The main reason for these results is the sanctions on Russian oil imposed by the US because of Russia’s war against Ukraine. In January alone, this caused oil and gas revenues to collapse in half to 393 billion rubles, which is 50% of the level for the same period last year. “In nominal terms, this is the lowest level since July 2020, and as a percentage of 2% of GDP, it is an anti-record for the entire era of Vladimir Putin,” commented Janis Kluge, an expert at the German Center for International Security Studies on Twitter.

Revenue from the key mineral extraction tax has fallen by almost 60% compared to January 2025, and from export duties by 44%.

The Ministry of Finance’s data points to a “budget disaster”, wrote MMI analysts quoted by The Moscow Times. Instead of the $59 a barrel forecast in the Treasury budget, the price of Russian Urals crude fell to $39 in December and $40 in January. And the price of oil in rubles, which is used to calculate taxes, fell to 3,073 rubles per barrel instead of the budgeted 5,440 rubles.

“The situation looks difficult for the budget,” notes Freedom Finance analyst Vladimir Chernov.

It is doubtful that the pledged tax revenue will be collected either, because many small and medium-sized enterprises have started to go bankrupt or voluntarily cease operations. This led to a spike in the prices of basic products, as well as a shortage in stores even in large cities.

Social media has been flooded with videos of citizens showing “innovative” methods of selling the products like sliced ​​bread.

Shoppers can even take a specific amount of candy out of the package if they don’t have enough money for it all.

Many products are not displayed on the stands at all because they are stolen – such as butter, which for some time was sold in locked display cases.

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