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. Last Updated: 07/27/2016

Declining Oil Prices Cause Budget to Post First Deficit

The country's budget posted its first monthly deficit this year in November, data showed Wednesday, with falling oil prices and the global financial crisis significantly denting tax receipts while spending grew.

November's budget deficit stood at 299 billion rubles ($10.73 billion), after a surplus of 222 billion rubles in October. Last year, deficits were recorded in November and December.

Payments collected by the tax service halved to 204 billion rubles, contributing to a 39 percent monthly fall in the budget's receipts to 571 billion rubles. Spending, meanwhile, rose by more than one-fifth to 870 billion rubles.

Revenues have been hurt by the slump in oil prices, which are down 70 percent from their July peaks to about $40 a barrel. The 2008 budget was based on oil averaging $75 a barrel, a target that will be met because of high prices in the first half.

But problems may arise in 2009 when $60-a-barrel oil will mean no budget surplus. Anything lower will require the use of reserves.

"Oil prices' further decline is expected to further depress budget revenues in 2009 ... potentially costing the budget 2.4 trillion rubles in revenues compared to the 2008 out-turn and moving the budget into a significant deficit in 2009, perhaps by as much as 3 to 4 percent of GDP," said Tim Ash, analyst at RBS.

November's data puts the year-to-date surplus at 6.3 percent of GDP, down from 7.8 percent the previous month. On the spending side, the budget faces extra demand to fund part of a more than $200 billion crisis rescue package for the economy and financial markets.

The Finance Ministry has proposed issuing domestic debt worth 536 billion rubles next year, but Deputy Finance Minister Dmitry Pankin said there would be no need to issue eurobonds despite any extra pressures on the budget.