Budget expenditures in January may trigger a key rate hike to 23%

Accelerated budget spending in January may stimulate the Central Bank to raise the key rate at the next meeting, according to experts interviewed by Izvestia.

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Taking into account the data on budget spending at the beginning of the year, the regulator may raise the key rate to 23% from the current 21% on February 14, believes Andrei Barkhota, PhD in Economics. Economist Alexei Krichevsky also did not rule out a rise in the rate to 22%.

"The impact of accelerated financing of January federal budget expenditures is likely to influence the decision of the Bank of Russia and motivate it to at least maintain the rate," believes Alla Chalova, associate professor of the Department of State and Municipal Finance at Plekhanov Russian Economic University.

According to the preliminary estimate of the Ministry of Finance, in January 2025, the budget was formed with a deficit of Br1.7 trillion. This is 42% higher than the expected year-end shortfall of 1.2 trillion and at the same time 16 times higher than the level of 2024.

In the first month, the authorities spent a total of Br4.4 trillion from the federal treasury, which is more than 10% of all planned expenditures for the year. This amount is 1.7 times higher than the 2024 figure for January.

The Ministry of Finance explained that the acceleration of expenditures at the beginning of the year is due to the fact that the government promptly concluded contracts with contractors and transferred advances on them. Treasury revenues for January also overtook last year's values, but only by 11.4%. They amounted to 2.7 trillion out of 40.3 trillion revenues planned for the year.

Read more in the exclusive material of Izvestia:

Advances have been given out: the treasury's spending in January may lead to an increase in the key rate