The RF Budget System Surplus Proves Cyclic and Technical

The Federal Treasury reports that at the end of the first five months of 2012, the enlarged government budget was executed with a Rb 1,150.9bn surplus (equivalent of 5.0% of GDP).
Between January and May 2012, the budgets of all tiers have been in the black; more specifically, the federal budget enjoyed a Rb 132.1bn surplus, public extrabudgetary funds - Rb 386.4bn, the RF Subjects' consolidated budget - Rb 484.5bn.

That said, while the major driver for the federal budget surplus over the first 5 months of the year has been an accelerated increase in oil-and-gas revenues in Q1, which was fueled by benign market prices for carbohydrates, the positive balance of the consolidated budget of RF Subjects in the period in question can be ascribed to a low pace of cash execution of the budgetexpenditure-wise: in the period concerned, the budget spending accounted just for 32.4% of the 2012appropriations. Should cash execution of the RF Subjects' consolidated budget expenditure hit 40%, providing the current revenue collection level, the budget would have shown a Rb 200bn deficit.

So, a considerable surplus of Russia's budget system over the period between January and May 2012 is most likely to prove a temporary and technical one. In the conditions of an accelerated spending of budget funds, its volume is going to dwindle by the end of the year. In the event of refusal of a series of expenditure obligations, surplus would enable to insignificantly reduce the planned volume of public borrowing and, as a consequence, future public debt servicing costs.

T. Tischenko, PhD, Senior Researcher, Budget Policy Department