Overview of Russia's budget state

The author of the Resurgam channel, who analyzed Moscow’s budget, stated this.

According to Resurgam, the second revision of the 2024 Russia budget occurred, which increased this year’s budget deficit from 2.1 trillion rubles to 3.35 trillion rubles. The initial deficit of 2.1 trillion was already the result of an increase from the originally planned 1.6 trillion rubles.

Russian Deputy Finance Minister Vladimir Kolychev stated, “We will finance (the deficit) using the accumulated ruble balances of the federal budget. There are enough balances, and there will be more.”

However, Resurgam remains perplexed: “I’m still trying to understand what these mysterious ‘balances’ are and why they aren’t reflected anywhere else.”

Later, the Ministry of Finance of Moscow provided conflicting information, indicating that the National Wealth Fund (NWF) would be used to cover the additional deficit in 2024. However, this Fund would not be tapped starting in 2025. 

Traditionally, as reported by Resurgam, the Russians have tried to downplay these issues. “Ruble balances” amounting to 410 billion were transferred to the NWF, increasing the liquid portion of the Fund from 4.85 trillion to 5.26 trillion rubles. However, this is still significantly less than the last shortfall of 1.3 trillion, not accounting for the existing main deficit before that.

In a month or two, the deficit will need to be covered by the Fund or another source. For 2025, the budget deficit is again planned at 1.2 trillion rubles, which raises questions given the experiences of 2022, 2023, and 2024. Even more intriguing is that for 2025, the planned deficit is not expected to be covered by the NWF, which is quite unclear.

Oil and gas revenues projected in the budget for 2025 are lower than those for 2024, and the increased tax revenue due to tax hikes doesn’t compensate for the total rise in record expenditures. 

“This is why my initial doubt is that the deficit for 2025 will be much higher than planned, and the claim that ‘we will manage without the NWF in 2025’ seems like a farce,” the author noted.

State of the NWF

As of October 2024, the liquid portion of the National Wealth Fund (NWF) stands at 5.26 trillion rubles (65% in yuan and 35% in gold). In October 2023, the liquid share was 5.06 trillion rubles. However, this change reflects the depreciation of the ruble. 

According to Resurgam, in terms of yuan and gold, the Fund has decreased in value over the past year, losing 66.5 tons of gold (from 358.96 to 292.5 tons) and 5.4 billion yuan (from 227.3 billion to 221.9 billion). This ongoing reduction is expected to continue, as the bulk of the deficit will need to be covered in late November and December 2024.

In 2023, during the final months of the year, it took 114.95 billion yuan and 232.6 tons of gold to cover a comparable deficit. To address an uncovered deficit of 2.9 trillion rubles at the end of 2023, the Bank of Moscow sold 114.95 billion yuan and 232.6 tons of gold. These assets were reportedly “discovered” within the NWF funds at the Bank of Moscow. Still, there are suspicions that they were direct gold and foreign exchange reserves of the National Bank that were sold. The proceeds from these sales were transferred directly to the NWF, increasing its temporary liquidity from 5.01 trillion to 6.9 trillion rubles as of November 2023.

However, by December 2023, the NWF’s liquidity fell to 4.9 trillion rubles due to the use of funds to cover the deficit. 

Therefore, the report concludes, either the Bank of Moscow will need to sell gold and foreign exchange reserves and transfer them to the NWF to continue covering the deficit, or the available funds in the NWF will only be sufficient to cover the current deficit and partially address it in 2025. Coupled with the recent issues surrounding the yuan, it appears that Moscow is attempting to obscure the true state of its reserves as much as possible.

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