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Budget expenditures continued to grow rapidly


According to the Ministry of Finance, the federal budget surplus totalled RUB 717bn, or 1.4% of GDP, in 10mo12. The monthly budget surplus decreased to 0.8% of GDP (RUB 46bn) in October, from 1.8% of GDP in September. Monthly revenues were up a modest 3.9% YoY (and 3.6% MoM), on the back of oil and gas revenues, which added 10.2% YoY (and 3.0% MoM). At the same time, monthly expenditures continued to grow significantly, spiking 39.2% YoY (and 10.2% MoM). MinFin’s outstanding deposits in banks increased RUB 106bn in October to RUB 609bn. The balance of MinFin’s accounts with the CBR increased RUB 253bn in October 2012, mainly due to net domestic debt placement (RUB 100bn) and FX revaluation (RUB 77bn).

The official figures came broadly in line with the recent comments of First Deputy Minister of Finance Tatyana Nesterenko. MinFin is to spend RUB 3.2tn in November-December 2012, which implies growth of 2% YoY (vs. 32% YoY in 1H12). Hence, we reiterate that tighter fiscal policy is likely to have a negative effect on the growth of the economy in the near term.

According to the CBR’s daily data on changes in the consolidated budget account, the overall effect of MinFin’s operations on liquidity was markedly negative in October (- RUB 147bn). In our view, net domestic borrowings (- RUB 100bn) and the budget surplus (- RUB 46bn) were the key drag for liquidity conditions in October, while depositing budget resources in the banking system was supportive (+ RUB 106bn) during the reported period.

Dmitry Loukashov, Alexander Kirevnin, Ekaterina Rodina, Elena Kopylova, Mikhail Zarkhi
VTB Capital analyst

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