The Russian government intends to collect more money from some commodity producers as well as state-owned companies while cutting non-defense spending as the cost of the war in Ukraine rises, Bloomberg reports.

Among the proposals are higher dividends from state-owned companies and “one-time payments” from fertilizer and coal producers, according to instructions issued in mid-December by Prime Minister Mykhailo Mishutin, the quoted source said.

The Moscow government’s measures are part of a broader “revenue mobilization.” In addition, the executive branch budgeted an additional 175 billion rubles (US$2.4 billion) to resettle 100,000 people from Kherson to Russia, a tacit admission by the Kremlin that there is no hope of retaking parts of Ukraine that Russian forces occupied abandoned last fall.

Russia’s budget is under increasing pressure as the invasion of Ukraine enters its second year and the Russian economy shrinks as a result of heavy sanctions imposed by the US and the European Union.

In December, a significant jump in spending was observed in Russia

Extraordinary dividends and taxes paid by energy giant PJSC Gazprom allowed Russia to post a budget surplus at the end of last year, but heavy spending in December may have pushed Russia into a deficit.

Sources cited by Bloomberg say some of the additional funds are needed to cover war-related costs.

The sources added that a decision on the size of dividends or “one-off payments” has not yet been made, as they will depend on the budgetary situation for the whole of 2022.

However, where possible, the Russian authorities will try to set the level of dividends above 50% of the net profit of state-owned companies, sources consulted by Bloomberg said.

The Russian Prime Minister calls for “optimization” of the budget

Trying to balance the budget situation, Prime Minister Mykhailo Mishustin ordered to “optimize” expenses not related to defense and security, which should save at least 150 billion rubles.

As Russia prepares for several years of budget deficits and an inability to access international bond markets, the government in Moscow is under pressure to ensure it has access to financing as energy revenues dwindle.

If last year the Ministry of Finance of Russia predicted a budget deficit of 0.9% of GDP, now it expects a deficit of 2% of GDP for both 2022 and 2023.

In total, last year’s spending probably reached about 30,000 billion rubles, Finance Minister Anton Siluanov said in late December, about 27% more than originally planned. (Source Agerpres)

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