Russian Duma passes 2023-2025 draft budget

MOSCOW. Nov 24 (Interfax) - The State Duma or lower house of Russia's parliament passed the draft federal budget for 2023 and the 2024 and 2025 planning period at its third and final reading on Thursday.

The bill, No. 201614-8, was introduced to the parliament on September 28 and passed at its second reading on November 22.

Budget revenue will in 2023 will be to 26.13 trillion rubles, or 17.4% of GDP, and it will increase to 27.24 trillion rubles in 2024, or 17.1% of GDP, and 27.979 trillion rubles in 2025, or 16.4% of GDP. Oil and gas revenue will total 8.939 trillion rubles, or 6% of GDP, 8.656 trillion rubles, or 5.4% of GDP, and 8.489 trillion rubles, or 5% of GDP, in the respective years.

Expenditures in 2023 will be 29.056 trillion rubles, or 19.4% of GDP, and will grow to 29.433 trillion rubles or 18.4% of GDP in 2024 and 29.244 trillion rubles or 17.1% of GDP in 2025.

The deficit is expected to be 2.925 trillion rubles or 2% of GDP in 2023, and to decrease to 2.192 trillion rubles, or 1.4% of GDP in 2024, and to 1.264 trillion rubles in 2025, or 0.7% of GDP.

The budget projects GDP at 149.949 trillion rubles in 2023, down 0.8%; 159.714 trillion rubles in 2024, up 2.6%; and 170.598 trillion rubles in 2025, up 2.6%.

Public domestic debt is capped at 20.697 trillion rubles as of January 1, 2024, then 22.804 trillion rubles on January 1, 2025 and 24.994 trillion rubles on January 1, 2026.

The foreign debt ceiling is $66.6 billion or 63.4 billion euros as of January 1, 2024, then $68.1 billion or 63.1 billion euros on January 2, 2025 and $68 billion or 61.2 billion euros on January 1, 2026.

Inflation should not rise above 5.5% in 2023, 4% in 2024 and 4% in 2025.

The National Wealth Fund will be 8.987 trillion rubles or 6% of GDP at the start of 2023, then 6.253 trillion rubles or 3.9% of GDP at the start of 2024 and 5.947 trillion rubles or 3.5% of GDP at the start of 2025.

The government introduced an amendment allowing it not to withdraw the subordinated deposit of 100 billion rubles issued to VTB in 2014 from the National Wealth Fund in order to finance infrastructure projects even if VTB has complications with capital adequacy.

The Duma approved an amendment to grant the government the option to exchange sovereign forex-denominated Eurobonds for new federal loan bonds or OFZ with a nominal value of up to 800 billion rubles in 2023. Government securities denominated in foreign currency will be exchanged only for ruble-denominated securities with the same or longer maturities. The bonds would be exchanged at their market value, to be determined by the government and in agreement with bond holders.

Separately, the amendment stipulates that the Bank of Russia has the right to receive government securities denominated in rubles during their initial placement as part of the exchange of FX-denominated Eurobonds held by the Central Bank.

The approved amendments also provide for an additional allocation of 1.742 million rubles in 2023 to Alfa-Bank, Sberbank , RusAg, VTB and Gazprombank to compensate for lost income on loans issued to Russian organizations carrying out IT projects. Also, these banks will receive 3 billion rubles in 2023 to compensate for losses on loans issued to companies to refinance debt, and 636 million rubles to recover loans for the e-commerce sector to refinance debt.

In addition, there are plans to allocate 1.593 billion rubles to lending institutions in 2023 and 2.585 billion rubles in 2024 under the preferential loans program for priority imports.

It is assumed that in 2023, by decision of the government, the federal budget may recapitalize JSC Russian Railways by up to 27.28 billion rubles provided the federal budget receives a subsidy in the specified amount from the City of Moscow's budget for projects to develop Central Transport Hub railway infrastructure, notably the organization of diametrical routes.

In addition, a property contribution to Rostec is planned, including for the subsequent recapitalization of United Aircraft Corporation by 4.7 billion rubles in 2023 to adjust and restore the airworthiness of aircraft.

State support for organizations to compensate a portion of interest on export credits and other economically similar financing instruments as well as to compensate a portion of the insurance premium under export credit insurance agreements will amount to 23 billion rubles in 2023, 30 billion rubles in 2024 and 9 billion rubles in 2025.

State support for Russian industrial organizations to compensate for the costs of transporting industrial products will amount to 25.4 billion rubles in 2023 and 26.2 billion rubles in 2024.

Government amendments also provide for the allocation of about 6 billion rubles in budget subsidies for the development of compressed natural gas filling infrastructure in Russia in 2023-2025, including 1.23 billion rubles in 2023, 2.212 billion rubles in 2024 and 2.46 billion rubles in 2025.

The Duma recommends in a draft budget resolution that the government submit proposals for the use of balances on the accounts of state corporations and companies, public companies and legal entities that receive subsidies from the federal budget, including income received from placing these balances on deposit accounts, and, if necessary, amending legislation in this area.

The draft resolution also mentions the need continue to abandon inefficient government programs.