According to MinFin, the federal budget surplus totalled RUB 247bn, or 0.9% of GDP, in 1H12. The monthly budget surplus decreased to 2.3% of GDP (RUB 115bn) in June from the (revised upward) 3.8% of GDP (RUB 184bn) surplus in May. Monthly revenues increased 1.1% YoY (up 9.0% MoM), with oil revenues decreasing 7.8% MoM due to continuing softening in oil prices last month. Monthly expenditures added 17.9% YoY in June and edged up 19.0% MoM. MinFin’s outstanding deposits in banks amounted to RUB 15.7bn at end-June, up from zero since 31 May. The balance of MinFin’s accounts with the CBR increased RUB 230bn in 1H12, due significantly to FX revaluation.
MinFin has followed its path of regular budget execution, with 1H12 expenditures close to 47% of the planned volume in the amended budget law (vs. 40-45% of planned volumes during 2006-11). Encouragingly, after the decline in expenditures in May (-22% MoM) MinFin again spent more than RUB 1tn last month. Thus, we are still facing smoother budget execution implying lower surpluses in 1H12 and narrower deficits in 2H12. Besides, we see significantly lower YoY growth in expenditures during 2H12, which would have a negative impact on economic growth.
The recent oil price decline (Urals was down 14% MoM in June to slightly below USD 95/bbl) was offset by USDRUB weakening (in June, RUB lost 6.7% against USD), preventing oil revenues from a heavier decrease in June. We estimate that the overall effect of MinFin’s operations on liquidity was markedly negative, around RUB 170bn in June, mainly because the budget was in surplus (RUB 115bn) and net domestic borrowings increased (RUB 55bn), while the ministry started depositing budget resources in the banking system (it placed some RUB 15.7bn in June). Coupled with the CBR’s net FX selling at USD 2.4bn, MinFin’s operations contributed to a worsening of local liquidity conditions in June.