Russia's budget deficit widens to $34.4 billion after late spending spree

By Darya Korsunskaya and Alexander Marrow

(Reuters) -Russia recorded a budget deficit of more than 3 trillion roubles for the third year running in 2024, the finance ministry said on Monday, with both spending and revenue rising sharply as Moscow ploughed economic resources into the war in Ukraine.

According to the ministry's preliminary estimate, the overall deficit stood at 3.49 trillion roubles ($34.4 billion), with revenues increasing 26% to 36.71 trillion roubles and spending climbing 24.2% to 40.19 trillion roubles.

The shortfall narrowed as a percentage of gross domestic product to 1.7% from 1.9% in 2023, the data showed, but was significantly wider than the ministry's initial plans for a deficit at 0.9% of GDP, or 1.6 trillion roubles.

Excluding crucial revenues from oil and gas, however, the deficit widened to 7.3% of GDP from 7% of GDP in 2023.

Spending rose sharply in December to 7.15 trillion roubles, exceeding the value of similar year-end expenditures in 2022 and 2023.

That jump involved some advance spending for this year, the ministry said. This could give it greater flexibility this year, when federal budget liabilities may increase if the Bank of Russia raises its key interest rate again.

The central bank held rates at 21% in December, surprising analysts who had forecast a sharp hike, a day after President Vladimir Putin publicly called for a "balanced" decision.

Moscow expects spending this year to increase to 41.47 trillion roubles, of which 41% will be spent on the army, police and secret services. Rising tax revenues are seen narrowing the fiscal deficit to 0.5% of GDP.

In 2024, the ministry adjusted its plans twice as the need for more spending arose.

($1 = 101.4955 roubles)

(Reporting by Darya Korsunskaya and Alexander Marrow; Editing by Alison Williams)