Russia's Budget Deficit Soars as Oil Revenue Plummets

Russia's Fiscal Crisis Deepens After Just One Month

Russia's federal budget is facing a severe crisis just one month into 2026, with the country already burning through nearly half of its planned annual deficit. According to official data from Russia's Finance Ministry, the budget deficit reached 1,718 billion rubles ($22.3 billion) in January alone - representing approximately 45% of the entire year's projected shortfall of 3,800 billion rubles ($49.4 billion).

Energy Revenue Collapse

The primary driver of this fiscal emergency is a dramatic collapse in oil and gas revenues, which plummeted by 50.2% year-on-year to just 393 billion rubles ($5.1 billion) in January 2026. This represents the lowest monthly energy revenue since July 2020 and comes amid falling global oil prices and Western sanctions that have forced Russia to sell its oil at steep discounts to alternative markets like China and India.

'The budget situation is deteriorating sharply. Revenues will be lower and expenditures higher,' a source familiar with the matter told Reuters, predicting that significant spending cuts are likely on the horizon.

War Economy Strains Resources

Russia's ongoing war in Ukraine continues to drain financial resources at an alarming rate. The country has been forced to tap into its National Welfare Fund - essentially its sovereign wealth reserve - to cover budget shortfalls. Analysis shows this fund's liquid assets have declined from over $110 billion before the war to approximately $48.9 billion as of September 2025, with further depletion expected.

Despite implementing new taxes and increasing VAT rates on various products - measures that boosted non-energy revenues by 18.5% - Russia's total tax revenues still fell by 11.6% in January compared to the same period last year.

Projected Deficit Triples

Financial analysts now predict Russia's budget deficit for 2026 could reach three times the government's original forecast, potentially hitting 3.5-4.4% of GDP compared to the planned 1.6%. This would mark a significant deterioration from 2025's deficit of 5,700 billion rubles ($74 billion).

The situation is exacerbated by reduced oil purchases from India, trade discounts exceeding 20% below world prices, high interest rates, and labor shortages. Russia's budget reserves of 4.1 trillion rubles could be nearly exhausted within a year at current spending rates.

Sources

Reuters: Russia's budget deficit may almost triple this year

Trading Economics: Russia's federal budget deficit widens

Beefeater Research: Russia's National Welfare Fund depletion

RBC Ukraine: Russia's oil collapse budget deficit surges