[Original in Russian. Automated translation with minimal edits]

Russia's federal budget deficit increased again in July, the Finance Ministry reported on Tuesday.

Over 7 months, the government collected 22.112 trillion roubles in taxes for the treasury — 8.8% more than the previous year. At the same time, expenditures increased almost twice as fast as revenues — by 14.5%, to 28.567 trillion roubles.

As a result, at the beginning of August, a "hole" of 6.455 trillion roubles appeared in the budget — an amount equal to the annual budget of Moscow, four annual budgets of St. Petersburg and 11 annual budgets of large regions such as Tatarstan or the Krasnodar Territory. Compared to the same dates last year, the deficit has increased by 1.4 times and is already almost twice the plan for the whole year (3.786 trillion roubles).

The fundamental picture for the budget continues to deteriorate, states Finam strategist Yaroslav Kabakov: oil and gas revenues for the first seven months decreased by 16.8%, and the increase in revenues from higher VAT (by 24.9%) barely compensates for this shortfall. At the same time, the Ministry of Finance is spending more and more, and it seems that by the end of the year, expenses may exceed the plan by almost 5 trillion roubles, according to Kabakov's assessment.

Balancing the budget is becoming increasingly difficult, notes Ilya Sokolov, a leading researcher at the Gaidar Institute: the surge in oil and gas revenues due to the war in Iran turned out to be short-lived and was largely spent on subsidies to oil companies, whose refineries are burning and shutting down one after another.

Non-resource revenues are increasing only due to higher taxes, not economic growth, Sokolov emphasises: in the first half of the year, GDP grew by only 0.3%, and in the second half of the year, the economy may slide into recession. This will lead to a shortfall of 600-800 billion roubles in VAT, as well as in corporate and personal income tax, warns Sokolov. By the end of the year, the budget deficit could approach 10 trillion roubles, Khabakov predicts.

Military spending remains the main unknown for the budget: it is clear that it will exceed the plan, but it is not yet known by how much, notes Ekaterina Vlasova, an economist for Russia and the CIS at Bloomberg Economics. According to Bloomberg, the Ministry of Defence is demanding an increase in the military budget by 40%, or 4-5 trillion roubles. The Ministry of Finance planned to satisfy the military's appetite through debt, but in July it was forced to suspend government bond auctions due to the market collapse.

Most likely, after the State Duma elections, fiscal tightening should be back on the agenda, Vlasova warns: the authorities may cut spending on non-military items or raise taxes. Due to problems with raising debt, a new VAT increase is possible, according to economist Kirill Rodionov.

Since the beginning of the invasion of Ukraine, the budget has spent almost 50 trillion roubles on the war. To pay for the army and weapons production, the government spent three-quarters of the National Welfare Fund's available funds, introduced export and exchange duties, increased the mineral extraction tax, and confiscated private assets worth 4 trillion roubles. In 2025, income tax and personal income tax for wealthy citizens were increased, and in 2026, VAT and taxes for small businesses rose.

"The easy money for the Kremlin is over," says Agathe Demarais, a senior fellow at the European Council on Foreign Relations: having started with businesses and billionaires, the authorities have switched to the wallets of ordinary people. This does not mean that Vladimir Putin "will soon run out of money, but he is definitely running out of politically acceptable ways to find it," Demaraïs emphasises.

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