Russia grants government power to alter budget, debt plans without public input

Russia's parliament has approved a new law that empowers the government to modify its spending and debt plans without requiring public hearings or formal amendments to the budget law. This legislative change, passed on Wednesday, is designed to provide the government with greater agility in responding to rapidly changing economic conditions.

The move comes as Russia faces a widening budget deficit, which stood at 2.6% of GDP in the first five months of the year, surpassing the annual target of 1.6%. This deficit is largely attributed to increased military expenditures supporting the ongoing conflict in Ukraine. The Finance Ministry cited advance payments on state contracts as a reason for the rise.

Under the new legislation, the government can now borrow beyond the limits stipulated in the budget law and increase spending without the lengthy parliamentary review process that previously caused delays. Crucially, these adjustments to debt and spending will no longer be subject to public disclosure.

Finance Minister Anton Siluanov has indicated that the deficit for 2026 is expected to be higher than initially projected, although the increase in borrowing is anticipated to be less significant than the 46% jump seen last year. This year's planned borrowing is set at 5.5 trillion roubles.

While Russia's financial position has been strained, including a recent VAT increase, higher global commodity prices have offered some respite, leading to the postponement of previously considered spending cuts. However, the Finance Ministry has pushed its target for achieving a primary budget balance, excluding debt servicing costs, to 2029, a move the central bank warned could slow down necessary interest rate cuts for the economy.