Putin delays VAT payments as Russia’s economy weakens

Wednesday 22 April 2026 - 10:40

By: Dakir Madiha

Putin delays VAT payments as Russia’s economy weakens

Russia’s fiscal position has deteriorated sharply in early 2026, forcing the government to introduce emergency measures as revenues fall and spending rises. The federal budget deficit reached 4.6 trillion rubles, or about 58.8 billion dollars, in the first quarter alone, already exceeding the full year target of 3.8 trillion rubles. Oil and gas revenues dropped by 45 percent year on year, while public spending increased by 17 percent, driven largely by military commitments linked to the war in Ukraine.

To support state finances, the central bank has sold around 700,000 troy ounces of gold, equivalent to about 22 metric tons, since January. This marks the first sustained gold sales in more than two decades. Total reserves declined to 74.1 million troy ounces at the start of April, down from 74.8 million at the beginning of the year. The sales form part of operations conducted on behalf of the National Wealth Fund as authorities seek to stabilize finances under mounting pressure.

President Vladimir Putin acknowledged the slowdown during a televised meeting with senior officials in mid April. He reported that gross domestic product contracted by 1.8 percent in January and February compared with the same period a year earlier. Manufacturing, industrial output, and construction all recorded declines, indicating broad weakness across key sectors. In response, Putin signed a decree allowing importers to delay value added tax payments for up to three months without interest, easing the burden of a higher VAT rate set at 22 percent from January.

External assessments suggest the economic situation may be more severe than official data indicates. Swedish intelligence officials have stated that inflation could be closer to 15 percent rather than the reported 5.86 percent, and that Russia may be understating its budget deficit by tens of billions of dollars. Analysts also argue that balancing the budget would require sustained oil prices above 100 dollars per barrel, a level difficult to maintain given current market conditions.

Economic forecasts point to continued weakness. Growth projections for 2026 have been revised down to around 1 percent or less, with some estimates closer to 0.8 percent. Investment is expected to decline further following a contraction in 2025, while high interest rates are weighing on corporate profitability. Business sentiment indicators have already fallen into negative territory, reinforcing concerns that the Russian economy is entering a prolonged period of stagnation.