Revenues from the oil and gas business are falling, and Russia is threatened with a budget deficit of almost 70 billion euros for the current year. Now Moscow is bracing itself against the debt with foreign exchange sales and possibly tax increases.

Despite high armaments spending and falling energy revenues, the Russian government wants to keep its financing deficit low – possibly with higher taxes. The budget deficit this year will not exceed two percent of gross domestic product (GDP), Finance Minister Anton Siluanov said in an interview broadcast on Rossiya 24 channel.

Siluanov was responding to a hefty deficit of nearly $25 billion in January alone, which was due in part to falling oil and gas revenues. This prompted analysts to project a budget deficit of up to 5.5 trillion rubles for the full year. That would correspond to 3.8 percent of GDP – almost twice as much as planned.

Russia is already selling foreign exchange worth 8.9 billion rubles a day to cover the deficit. The government is also considering a one-time “voluntary” tax for large companies. According to Siluanov, this could bring around 300 billion rubles into the state coffers. Discussions are currently being held with industry about how this “support” can be provided. “Special amendments to tax legislation are being prepared,” said Siluanov.

He left open which sectors will be affected, but excluded small businesses and the oil and gas sector. “I am sure that we will soon find the optimal instrument for companies to participate in the financing of state programs,” said Siluanov.

The central bank recently warned that a high deficit could fuel inflation. This would force it to raise interest rates, which in turn could weigh on the economy. An unexpectedly large budget deficit could also require a mix of higher foreign exchange sales, spending cuts, higher borrowing or tax increases.