October 3, 2023 MEMRI Daily Brief No. 528

Russia's 2024 Federal Budget Shows Resilience To External Economic Shocks

October 3, 2023 | By Dr. Vladislav L. Inozemtsev*
Russia | MEMRI Daily Brief No. 528

The Russian government finalized its draft of the federal budget for 2024, which is the country's largest ever, if not by the share of Russia's GDP than by absolute numbers. The revenue is projected at 35 trillion rubles ($388 billion)[1] – 33.9 percent larger than this year in rubles and 20 percent larger in dollar, as the authorities forecast that the average exchange rate for 2024 is going to be around 90.1 rubles for one dollar.[2]

The outlays will grow to 36.6 trillion rubles ($380 bil­lion) along with the military allocation driving the surge: the defense spending alone in­flates to 10.7 trillion rubles ($118.7 billion) from a projected figure of 6.4 trillion in 2023,[3] surpassing $100-billion mark for the first time in Russia's history, and, if ta­ken together with several other allocations, which also feed the needs of the military, the figure can exceed 13 trillion rubles, which would be an amount of money three times bigger compared to 2021 spen­ding.[4] But, by any standard, budget revenues in Russia will remain low: just 19.4 percent of GDP compared to around 24.2 percent in the US and up to 35-44 percent in Western Europe.[5]

(Source: Twitter)

Russia Is The Most "Militarized" Eurasian Country

In Russia, since 2007, the budget has been drafted for three-year periods. Thus, the latest one was drafted for the period of 2024-2026. This allows the Kremlin propagandists to display fantastic expenditure figures: 4.3 trillion rubles for children's welfare, 3.45 trillion for constructing new roads and a staggering 1 trillion for industrial research and development.[6] However, all these figures, when divided by three, are not so impressive compared with the allocations for the war in Ukraine, which allows Russian President Putin to rule the country by war-time measures, suppressing dissidents, nationalizing foreign investments, and mobilizing the people to the army even through partial border closures for several categories of citizens.

While Russia these days does not look like a country waging a full-scale war – ordinary life has not changed a lot; shops and restaurants remain as crowded as before, and real disposable incomes are even on the rise – Rus­sia's budget shows that it is.

The allocations for the national economy (meaning the spending on infrastructure, public-private partnerships, research and development, etc.) drop to a me­re 10.7 percent of the total expenditure (the smallest share since 2007), while tho­se dedicated to social policy (pensions, welfare payments, etc.) to 21.1 percent (the smallest share since 2011 as the average figure for 2012-2018 stood at 28 percent).[7]

By contrast, the military spending has increased to 29.3 percent (the record high $831.8-billion strong U.S. military appropriations for 2024 account for only 13.1 percent of the federal spendings).[8] Russia's military expenditures for 2024, being six percent of the GDP, appear to be the largest in post-Soviet history and will ma­ke Russia the most "militarized" Eurasian country, except for Ukraine.[9]

The Most Visible Rise In Revenue Came From Outside The Energy Sector

The main question that now posed by many experts is how realistic the budget looks. For 2023, the revenues were optimistically projec­ted to reach 26.13 trillion rubles ($270 billion), but these days it seems that they may be a bit higher, at around 26.5-26.7 trillion, after lagging the plan in Q1 and Q2.[10]

On the one hand, the drive is fueled by the recovering oil prices and Russia's ability to bypass the "price cap," while keeping export volumes almost intact as India, China, and other Asian nations become primary impor­ters of Russian oil. Furthermore, Western countries not only are increasing their purchases of petrole­um products processed from the Russian oil over­seas (exports from China, India, Turkey, and Singapore – which are net importers of oil – to those countries, which adopted an embargo for Russian oil, shoot up by 80 percent, in the first 12 months after Moscow's invasion of Ukrai­ne),[11] but are starting to buy Russian crude di­rectly from India thus violating the sanctions they had themselves imposed.[12]

On the other hand, the increase in revenues originated from a significant rise in non-oil-and-gas proceeds, due to the rising government funding of the national economy (pri­marily the military-industrial complex and infrastructure construction works), which cau­sed a multiplicator effect. In 2023, the most visible rise in revenue came from outside the energy sector, as, from January through August, the non-oil-and-gas proceeds were up by 24.2 percent compared to 2022 and con­tributed 55.6 percent of the overall budget revenues, exceeding those from the energy sector by 1.25 times (for 2024, the government relies on the same trend, projecting these revenues to exceed those derived from the energy sector by a factor of two).[13] I would say that the budget goals could be met if the average annual price for Rus­sia's oil stays at $65/barrel, and the economic growth hits 2.5 percent in the next year – and both assessments look realistic enough.

The Kremlin Possesses Sources Of Revenue Growth

Moreover, the Kremlin possesses two additional sources of revenue growth. First of all, the oil price projections look conservative enough: they stay at $85/barrel for 2024 and at $76/barrel for 2026, while many observers predict that oil prices will hit $100/barrel this year and do not exclude possible fu­ture hikes as well.[14] The discount for Russia's Urals blend decreased from $30-32 per barrel compared to Brent in February 2023 to less than $12 per barrel today,[15] and it may become even lower in the coming months. In addition, some Russian energy analy­sts who famously (and incorrectly) predicted a decline in oil production by over 50 percent in 2023,[16] are now giving the same prediction for 2025,[17] which may not turn out to be the case. In general, I would suppose that the energy revenue may well exceed the 2024 projections by up to 1 trillion rubles($10 billion).

Second, the business climate in Russia is now suppressed by the Central Bank's policies and its high interest rates (the key rate was just recently increased from 12.5 to 13 percent,[18] yet Russian Central Bank Governor Elvira Nabiullina admitted that inflation risks are here to stay).[19] However, I'm not so sure that the Russian authorities would allow the Bank to keep the rates as high as they are now: the money supply is abundant, and many industries need additional funds for a rather long term (e.g., the residential const­ruc­tion grows so fast that it might take from three to five years to sell all the apartments being shown these days in Russia's major cities).[20] Hence, I would predict that the rates will go down by mid-2024, and this move may increase business profits and, the­refore, tax collection. The deficit, projected at 1.6 trillion rubles for 2024 and at 1.5 trillion rubles for 2026, may therefore become far smaller (I would not ex­clude a balanced budget to be executed in one of the coming years).[21]

Another important point, which often remains neglected, reflects the changing situation with Russia's public debt, which before the war, reached 18.1 percent of GDP. It comprised 77 percent ruble-denominated debt and 23 percent the bonds and loans denominated in foreign currencies.[22] After 2022, as the United States effectively forced Russia to default since the payments on Euro­bonds were not serviced anymore after May 25, 2022,[23] the Russian foreign debt has been statistically recalculated into Rubles, with both the Russian investors and tho­se originating from "friendly" countries being now able to get both interest pay­ments and the value of the bonds being paid to the accounts in Russia or abroad.[24] Such a switch, I would say, produced a staggering effect, since even while the government continued its borrowing, and the real GDP contracted by 2.1 percent in 2022,[25] the debt-to-GDP ratio went down to less than 15 percent (the decline was al­so caused by the termination of new borrowing from international capital markets after the start of the war).[26] Such a trend opens new options for the Rus­sian government to increase the borrowing (just recently, Finance Minister Anton Si­luanov confirmed that the deficit will be most likely covered by additional borro­wing and not through mobilization of reserves).[27] 

In 2024, Russians Will Pay More Taxes, As The Government Does Not Want To Spend Less

The elaboration of any federal budget in Russia presupposes economizing on various spending problems at the very start of the process, with gradual increase of allocations during the year (the average increase in spending since 2009 stays at 12 percent, while there was not a single case, during these years, in which the government has cut the expenditures, after the budget was signed into law). Even for the year 2023, nothing has changed, and the proposed 10-percent cut in financing of the so-called "unprotected" expenditures was never realized. I would also project that in 2024 the budget revenue may rise, and these increases would much more probably be used for additional financing of different programs than for cutting the deficit or lowering taxes. I would be happy to be wrong, but it looks like the total spending might become even larger than is expected these days.

The last important issue I would like to address is the issue of taxes. For many years, the Kremlin reiterated its intention not to raise tax payments, but constantly neglects it once and again. For 2024, I would mention three major points. First, whi­le the government most probably will not increase basic taxes like VAT and profit tax, one can expect a significant rise in "discretionary" smart taxation – the recent initiative to seize the "excess profits" that originate for unexpected devaluation of the ruble is just one example. It is worth noting that, starting from October 1, 2023, the export-oriented com­panies are obliged to contribute to the budget up to seven percent of their revenue in "special export duties," if the exchange rate exceeds 80 rubles to the dollar, since the government believes such a "weak" ruble inflates the companies' turnover.[28] Hence, I would mention that the official economic forecast, which is used as the guiding foundation for the 2024 budget, fo­resees the average exchange rate for the next year at Rub 90.1/dollar,[29] which means that the "extraordinary" duty may become a regular one.

The officials at the Finance Ministry used to call such a process "spot adjustment," pretending that these measures will not affect the broader economy (nevertheless, this new levy alone is expected to contribute up to 700 billion rubles ($7.23 billion) to the federal coffers in 2024). Second, for the first time in many years, the government is projecting lower dividends collected from the state-controlled companies than in the previous year (the decrease is quite significant at 23 percent, compared to the amount indicated in 2023 budget projections).[30] Such a change may mean that the Finance Ministry decided to increase the overall tax burden on these companies, since the collection of dividends looked unpredictable in recent years and therefore distorted the budget processing. Third, the significant increase of the overall tax revenues without any rise in official tax rates means that the government is betting on more efficient tax collection, which is bad news for entrepreneurs. Russians – both the ci­tizens and the businesses – will pay more in 2024 since the government seemin­gly does not want to spend less.


To finalize, I would argue that the 2024 budget reflects all the features of an economy that appears to be surprisingly resilient to external shocks and has adopted to the challenges of a full-scale military confrontation that now is expected to last for years. It refutes many forecasts pretending that the Russian fiscal system is unprepared for such an extraordinary turn, and it seems that in the coming year the Kremlin will not experience significant financial problems, which, it seems, cannot be said about Ukraine, which remains completely dependent on foreign funds.

*Dr. Vladislav Inozemtsev is the MEMRI Russian Media Studies Project Special Advisor, and Founder and Director of the Moscow-based Center for Post-Industrial Studies.


[1], September 22, 2023.

[2], September 12, 2023.

[3], September 25, 2023.

[4], September 22, 2023.

[5], September 22, 2023;, March 2023.

[6], September 22, 2023.

[7], September 26, 2023.

[8], March 2023.

[9], September 22, 2023.

[10], November 24, 2022.

[11], April 2023.

[12], September 12, 2023.

[13];, September 22, 2023.

[14], September 12, 2023.

[15], September 14, 2023.




[19], September 15, 2023.


[21], September 22, 2023.

[22], March 3, 2023.

[23], May 24, 2022.

[24], January 10, 2023

[25], April 7, 2023.

[26], July 5, 2023.

[27], September 22, 2023.

[28], September 21, 2023.

[29], September 12, 2023.

[30], September 26, 2023.

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