Sequestration and nationalization. Where can the authorities get money when there is a hole in the budget and the National Welfare Fund is melting away?

Elena Petrova, Tatyana Sviridova

The President approved changes to the main law of the country for 2025 — the budget law. In five months, the economic situation has worsened. Despite the success of nationalization and the increase in taxes for the population and business, the financial authorities were forced to increase the budget deficit threefold, to 3.8 trillion rubles.

They are saving on investments in civilian sectors. How have the state's plans changed for the next five years?

Military spending will increase. The rest will be optimized, says Igor Nikolaev, leading research fellow at the Institute of Economics of the Russian Academy of Sciences :

— The budget expenditure increased from 41.5 to over 42 trillion. Against this background, we see a reduction in individual programs. Yes, this can be considered if not as a sequestration, then as a budget optimization. To put it politically correctly.

The damage to border regions that occurred during the SVO is estimated at hundreds of billions. It may not have even been taken into account in the federal budget. At the initiative of the president, officials have launched a new program to restore damage as a result of military actions for three regions - Kursk, Bryansk and Belgorod.

For a long time, the Belgorod Region restored the homes of residents and objects damaged by Ukrainian drone strikes and saboteur raids from its own funds. Apparently, the money ran out.

But the damage indicated by the regional administration goes far beyond the capabilities of the subject of the Federation. So far, and this is the point emphasized by the government of the Belgorod Region, direct losses here have been calculated at 157 billion rubles. This is only slightly short of the size of the annual budget of the region. But the year is not over yet, just as the SVO has not ended.

Bryansk Region suffered the least. Here they counted "only" 40 billion rubles. If not for the military actions, it would be possible to almost double social spending, which is planned at 55 billion rubles.

The Kursk region suffered the greatest losses. This is understandable. Here, military actions took place for six months on the territory of the region. This requires several times more money for restoration than for Belgorod and, especially, Bryansk. At the beginning of the year, the Kursk region would need 750 billion rubles to eliminate the consequences of the breakthrough of the Ukrainian Armed Forces. This is approximately 8.5 pre-war budgets of the region.

According to the plan, the state must restore infrastructure, provide social support to the population and ensure its safety.

In the Belgorod region alone, 3.5 thousand residential apartments, 1.2 thousand boiler houses and other housing and communal services facilities, hundreds of schools and kindergartens, dozens of medical centers, sports complexes and other social and cultural facilities were destroyed.

So far this year the government has allocated 3 billion to support Belgorod businesses and 2 billion to farmers. 157 billion is needed, and even this figure is preliminary.

The regions hope that the money will come from Moscow, they have no funds of their own. But so far the center has only "pleased" the local authorities with a little help.

The decision to amend the budget indicates that its implementation is becoming increasingly difficult.

— This is primarily indicated by the budget deficit indicator, which has increased to 3.8 trillion rubles. In percentage of GDP, this is not so much, it seems to be 1.7%, but it was 0.5%, in fact, the budget deficit indicator has increased more than three times. It is becoming chronic. Therefore, against this background, tens of billions of rubles become what is paid attention to when optimizing the budget, — says Igor Nikolaev.

Oil and gas revenues of the federal budget have fallen sharply. This year, hydrocarbon exports will bring the treasury a quarter less — 8.3 trillion rubles instead of 10.8 trillion. In fact, the government does not know what will happen to the price of oil. As soon as the Russian authorities exhaled at the peak of the Iran-Israel war, when world prices jumped from 62 to 72 dollars per barrel, the war ended and oil fell again to the 2023 lows. In May, for example, the oil industry failed to give the treasury a third of the planned money.

It is better not to remember the NWF safety cushion. Since December, the fund has lost 3 trillion rubles. Now, in case of emergency, 2.8 trillion are stored there - less than the hole in the country's budget. But this is an emergency reserve, and officials will be advised to look for money elsewhere.

How much can be earned from the sale of nationalized enterprises? Despite the euphoria in power circles and daily reports about how the historical mistake of privatization is being corrected, the state will not receive much money.

— Siluanov spoke about this last spring: those enterprises that are transferred to state ownership are going to be put up for sale. Here, the price of the issue is also, possibly, several hundred billion rubles. The minister said, in principle, in the spring of 2024, that the state does not need these assets, and the income from their sale can be significant. Of course, not trillions of rubles, but not tens of billions either. Last year, Anton Siluanov estimated the income at 100 billion rubles, — Igor Nikolaev recalls.

Even if this amount triples, it will not cover either the budget deficit or new expenses for the restoration of what was destroyed in the border regions, which only preliminarily amount to about one trillion rubles.

But in a political and social sense, nationalization is a winning story for the government. Firstly, it is money out of thin air. Factories and ships suddenly become state-owned again, and no matter how much they are sold for the second time, the budget gets 100% of the profit without spending a penny. Secondly, the people will only rub their hands with glee, seeing how “the rich also cry.” And, thirdly, such assets can be safely awarded to businessmen close to the government. Yes, they will pay money, but they will receive working and profitable enterprises.

Well, what about the sacred right to private property? As the famous old joke goes, they didn't promise to feed us on the road.

First of all, the authorities will cut the budget even more actively. As a rule, investments are the first to suffer.

— Traditionally, what can be cut is various types of investment programs. In principle, if we talk about how to cut expenses, the first candidate is always investments. Precisely because these are not social expenses, not such a socially sensitive story, — the economist believes.

For now, social programs are not in any danger. But experts are no longer so sure about tax increases. Yes, the authorities will not dare to increase personal income tax and profit tax every year. But we can only speak with certainty about 2026, Igor Nikolaev believes:

— It seems that the number one candidate or the number one mechanism is to raise taxes. This does not mean that there will be no optimization, but there will be nothing radical. Raising taxes every year will be very sensitive, and for now there is an opportunity to refrain from doing so. But this does not guarantee that we will not face another tax increase from 2027. So the answer is: not yet, but the likelihood of tax increases in a couple of years is growing.