New internal estimates compiled by economists associated with a government-linked research body show Russia's public finances may be headed toward a substantially larger deficit than officially forecast for 2026. The analysis, which is not due for publication and was described to Reuters by a person close to the government, finds that declining oil receipts and higher-than-expected expenditure could push the budget shortfall to between 3.5% and 4.4% of gross domestic product, compared with the government's planned deficit of 1.6% of GDP.
The calculations attribute the gap primarily to an assumed 18% drop in energy revenues relative to the government's plan for 2026. At the same time, the economists projected overall spending could increase by between 4.1% and 8.4%, eroding the fiscal position further. On that basis, total budget revenues are expected to be about 6% below plan, reaching 37.9 trillion roubles, which the estimates convert to $494.78 billion.
"The budget situation is sharply deteriorating. Revenues will be lower and expenditures higher," the anonymous source said, noting the sensitivity of the topic and requesting not to be named. The source identified the calculations as coming from a government-linked think tank and said they are not scheduled for public release.
Recent data and economic backdrop
Official figures released by the government this week underscore the pressure on energy receipts. Budget energy revenues in January dropped by half, falling to 393.3 billion roubles, a level reported as the weakest since July 2020 and converted in the estimates to $5.13 billion. The wider Russian economy, which weathered the early years of war with relative resilience, experienced a pronounced slowdown last year as the central bank lifted interest rates to levels not seen since the early 2000s in an effort to tame inflation.
Analysts and government calculations typically assume the current geopolitical and sanctions environment will persist. Unless stated otherwise, official scenarios presume the war in Ukraine will continue into 2026 and that Western sanctions will remain in place, factors that shape baseline revenue and expenditure planning.
How oil market dynamics are squeezing revenues
Western restrictions on Russian energy and related measures aimed at customers have contributed to Russian crude trading at discounts exceeding 20% compared with international benchmarks, according to the think-tank calculations cited. In addition, the rouble's roughly 45% appreciation against the U.S. dollar last year reduced rouble-denominated tax receipts because oil taxes are calculated on dollar prices but remitted in roubles, the source explained.
The confidential estimates assumed a 30% drop in Indian purchases of Russian oil as part of their baseline, a figure the economists used before U.S. President Donald Trump publicly stated he had persuaded India to cease buying Russian oil. The think-tank assessments were prepared prior to that declaration, but maintained the 30% assumption for the sake of their modelling.
Fiscal buffers and possible policy responses
Russia currently holds fiscal reserves totalling 4.1 trillion roubles that could be deployed to cover budget shortfalls. However, the internal calculations, and similar estimates from private analysts, suggest that if revenue declines continue at the present rate those reserves could be significantly depleted within about a year.
The anonymous source cautioned that a growing deficit and falling reserves would not automatically precipitate an economic collapse, but would require action from financial authorities. "This is not a catastrophe. It is something that can actually be financed, but not at such interest rates," the source said, adding the finance ministry would likely propose spending cuts, a move the source regarded as ill-advised during a slowdown.
Some assumptions embedded in the current budget framework were described by the source as unrealistic, including a modest planned reduction in military spending. The source did not provide further detail on which line items might be adjusted.
Independent estimates and the state budget rule
Commercial analysts have produced broadly similar projections. Alfa Investment's modelling indicates that if discounted oil prices and the prevailing rouble exchange rate persist, the budget could fall short by approximately 3 trillion roubles in revenues this year, necessitating the use of roughly 73% of liquid fiscal reserves. VTB analysts estimate a 2.5 trillion roubles withdrawal from reserves in 2026, leaving a remaining cushion of around 1.6 trillion roubles.
Russia operates a budget rule designed to smooth oil revenue volatility. Under this system, revenues above a specified cut-off oil price are placed into a fiscal reserve fund. Russian crude has consistently traded below the cut-off price, which is currently set at $59 per barrel. The government intends to lower that cut-off by $1 per year so that future transfers into the reserve fund are more predictable when oil prices rise.
Political context and official commentary
Deputy Prime Minister Alexander Novak has publicly said that Western sanctions have targeted budget revenues. On February 3 Novak emphasized the importance of maintaining a balanced budget as a foundation of financial and economic stability. "Budgetary balance, which exists, is one of the key foundations for maintaining the stability of our finances and our economy. These are the indicators that we must not destabilise," he said.
The Finance Ministry, which compiles its own forecasts, declined to comment on the think-tank estimates when approached. The anonymous source noted the think-tank figures are broadly in line with calculations performed by banks and other research organisations.
Negotiations and near-term outlook
The revenue shortfall was identified against the backdrop of U.S.-mediated talks between Russia and Ukraine taking place in the United Arab Emirates this week, where participants have reported progress toward a possible settlement. The source did not link the negotiations to the fiscal estimates, but the timing highlights the overlap of fiscal strains with diplomatic developments.
The confidential projections underscore the fiscal challenge: an 18% drop in energy revenues compared with plan, overall revenues down 6% to 37.9 trillion roubles, and potential spending growth of up to 8.4% could lift the deficit close to triple the government's target. With fiscal reserves at 4.1 trillion roubles and analysts warning of rapid drawdowns if trends continue, financial authorities are likely to face difficult choices on spending, reserve use and broader policy responses.
(Currency conversion used in the calculations: $1 = 76.6000 roubles)