Central Bank of Russia expects disinflationary effect from budget, slowdown of spending to meet annual plan - Nabiullina

MOSCOW. April 3 (Interfax) - The Central Bank of Russia expects federal budget expenditures to stabilize in coming months following a surge at the beginning of the year, and to meet fiscal rule specifications by the end of 2025, retaining their disinflationary impact.

"At the beginning of this year, government procurement was taking more money out of the budget, and many people commented on the budget deficit. We are working on the basis that this rate of expenditure will be reduced in coming months and that across the year the budget will meet fiscal rule specifications, meaning it will have a disinflationary effect," Central Bank Governor Elvira Nabiullina said at a joint meeting of the State Duma committees dedicated to the Bank of Russia's 2024 annual report.

She also said that fiscal and monetary policy were not in conflict with each other, even during periods where one is soft and the other tight. "The reason why monetary policy needs to be independent is not so that we can take decisions in defiance of the government. Monetary policy always provides a balancing function, protecting macroeconomic stability," Nabiullina said.

Preliminary data from the Finance Ministry indicate there was a federal budget deficit of 2.701 trillion rubles, or 1.3% of GDP in January-February. This year's budget projects a deficit of 1.173 trillion rubles, or 0.5% of GDP. The Finance Ministry attributed the deficit in 2M 2025 primarily to accelerated expenditure financing in January. This will not affect the quarterly trajectory or execution of the structural balance targets for 2025 as a whole, the ministry said.

Budget expenditures in January-February increased 30.6% year-on-year to 8.045 trillion rubles.

The Russian budget deficit was 3.841 trillion rubles, according to data from the Federal Treasury published on Monday. It said budget revenues were 3.923 trillion rubles while the MinFin said 5.344 trillion rubles, and expenditures were 7.764 trillion rubles, compared with the ministry's estimate of 8.045 trillion rubles.