Government meeting

Agenda: draft federal budget, forecast for the socioeconomic development, draft Guidelines for the State Unified Monetary Policy, draft budgets of the state extra-budgetary funds for 2027 and the 2028-2029 planning period, and support for the border regions.

Mikhail Mishustin's opening remarks

Report by Minister of Economic Development Maxim Reshetnikov about the forecast for socioeconomic development for 2027 and the 2028-2029 planning period

Report by Finance Minister Anton Siluanov about the draft federal law "On the Federal Budget for 2027 and the 2028-2029 Planning Period"

Excerpt from the transcript:

Mikhail Mishustin: Good afternoon, colleagues.

Today's Government meeting agenda includes a major set of items concerning the draft federal budget for the next three years. The Government has nearly completed it, and it can be submitted for consideration by the State Duma within the established timeframe. Along with it, we are submitting the socioeconomic development forecast, the budgets of the Social Fund and the Compulsory Medical Insurance Fund, and other documents. As usual, the Bank of Russia will present the Guidelines for Monetary Policy.

While working on the country's main financial law, we have factored in existing challenges. Security issues need special attention. Global trade imbalances are intensifying. The energy market is changing, regional protectionism is growing, and transport and logistics costs are increasing. Thanks to the efficient implementation of the President's instructions and the joint efforts undertaken by the Government, the Bank of Russia, parliament, the regions, and the business community, our economy remains resilient to these changes.

Bearing the above challenges in mind, the financial stability of the state as a whole comes to the forefront as it provides the foundation for moving forward with confidence. A balanced budget is the only thing that will make it possible to consistently implement our development objectives. Without a doubt, as the President made abundantly clear, meeting the state's social obligations, strengthening the country's defence capability, and growing the economy as a whole are on the list of our top priorities.

Last week, we reported to the head of state on the main approaches to drafting the new three-year financial plan. They are as realistic as possible based on the current state of affairs.

The budget is based on the baseline socioeconomic development forecast which assumes that domestic demand will be the main driver of GDP growth which is expected to add 1.4 percent next year. Subsequently, growth is projected to accelerate steadily, reaching 2.4 percent in 2029.

Minister of Economic Development Maxim Reshetnikov will get back to this matter with more details later.

Now, let's look at the key budget figures.

As is customary, I will start with the revenue. In 2027, it is projected at 43.3 trillion roubles, rising to almost 48.4 trillion by 2029.

This dynamic will make it possible to fund the most important areas of focus.

Spending for next year is planned at 48.8 trillion roubles.

The budget will focus on three priority issues. Meeting social obligations comes first, no doubt about it. Above all, this means supporting families with children. We will continue improving healthcare and the education system.

Ensuring the country's defence and security, and providing social assistance to participants in the special military operation and their families comes second.

Third is achieving the national goals, including technological leadership, set by the head of state. In particular, the development of machine-tool manufacturing and the microelectronics and radio-electronics industries will continue.

Overall, around 19 trillion roubles have been earmarked for funding national projects, including technological projects.

Of course, we will continue supporting the regions, since many challenges are addressed at the local level. The amount of federal support for the regions will be maintained at this year's level.

Finance Minister Anton Siluanov will provide more details on the numbers in the country's main financial document later.

Today, we will also consider the draft budget of the Pension and Social Fund of Russia which oversees social protection of the people of virtually all ages.

The President has emphasised that "people, Russian families, and their aspirations must take centre stage in all our programmes, steps, and decisions."

This is precisely the approach we took when determining the Fund's main funding parameters for the next three years. Funding has been provided for the annual adjustment of pensions, maternity capital, the monthly allowance payable to families with new babies and young children, support for people with disabilities, insurance against accidents and occupational diseases, as well as assistance to participants in the special military operation and their families.

In all, over the three-year period, we plan to allocate over 63 trillion roubles to implement the Social Fund's objectives.

Let us turn to the draft budget of the Compulsory Medical Insurance Fund.

This document is about providing free primary and emergency care, disease prevention and timely health screenings, looking after patients who need specialised and, in some cases, high-tech medical treatment, as well as the salaries of doctors and other medical personnel.

The head of state has repeatedly mentioned the need "to continue striving to ensure that high-quality, modern medical care is accessible throughout our vast country."

This approach was also followed in preparing a draft law on financing the Fund. More than 16 trillion roubles will be allocated for these purposes over the three-year period.

Importantly, the decisions set out in the document must be considered by the legislators without delay.

The draft Guidelines for the State Unified Monetary Policy for the next three years is part of today's agenda as well. Its main objective will remain keeping inflation around 4 percent.

Now, let's turn to providing assistance to the border regions, above all their residents. The President has expressed his gratitude to all those living in the border areas for their courage and solidarity. He has particularly stressed that we will do everything possible to support them. To this end, a set of measures is being implemented as part of a comprehensive programme for rebuilding and improving the Belgorod, Bryansk, and Kursk regions which includes social and medical facilities, education, utilities, and transport.

To help local enterprises, tax and insurance premium payment deferrals are being provided, as well as subsidies to pay employees' wages during forced downtime. Of course, targeted assistance to our citizens is a key priority. We will allocate additionally over 2.5 billion roubles to those whose houses or flats in the Belgorod and Kursk regions were destroyed.

We expect this decision will help people get back to their usual lives more quickly.

Let us start the discussion. On the first issue, I give the floor to Minister of Economic Development Maxim Reshetnikov. Please go ahead.

Maxim Reshetnikov: Mr Mishustin, colleagues,

I will present our socio-economic development forecast for the next three years.

We have upgraded our 2026 economic growth forecast to 0.6 percent and expect economic growth to increase from 1.4 percent in 2027 to 2.4 percent in 2029.

External assumptions remain conservative. The Brent crude oil price for 2027 is projected at $73 per barrel, decreasing to $66 by 2029. Our assessment of external conditions takes into account the fact that futures prices for this period will be considerably higher but volatile, largely reflecting developments around the Arabian Peninsula.

The forecast for the Urals oil prices is $1 to $3 lower because we assume a wider discount to Brent crude. We expect Urals oil to cost $53 per barrel in 2027 and $51 by 2029. This is only slightly above the $50 cut-off price, which we have set for 2027 and onwards. Our oil production assessment for 2026 is 494 million tonnes. We expect production to grow to 500 million metric tons in 2027, and to 505 million tonnes in 2028-2029.

As for gas, we take into account the reduction of exports to Europe in the next three years, a smoother growth in shipments to China and limits on LNG, primarily under the Arctic LNG 2 project, due to sanctions.

The annual average exchange rate will be 79.50 roubles per dollar due to a stronger rouble in the second and third quarters.

We maintain our forecast of a gradual weakening of the rouble in 2027-2029.

I will now say a few words about the sources of economic growth: consumption, investment and net exports.

Consumer demand remains the mainstay of economic growth. We expect it to grow substantially, by 4.1 percent, in 2026.

Consumer activity is supported by the growing incomes of the people, the main sources being labour and entrepreneurial income, as well as the implementation of all our social obligations. The real monetary incomes are expected to grow by 0.8 percent and 1.5 percent, respectively, in 2026-2027. We expect their growth to accelerate to 2.8 percent by 2029.

The year-end 2026 inflation is estimated at 6.8 percent, expecting it to go down to 4 percent by the end of 2027, in accordance with the Bank of Russia forecast.

The investment forecast takes into account a higher key rate trajectory in the Bank of Russia forecast. Investment recovery will begin in 2027, although growth will be symbolic, 0.2 percent, but we expect it to accelerate to 2.5 percent and 3 percent in 2028 and 2029, respectively.

The contribution of net exports to GDP growth in the next three years is expected to be small but positive, an average of 0.2 percent a year.

From a sectoral perspective, growth will be fuelled by domestic demand-oriented industries, primarily manufacturing. They will grow by about 3.5 percent a year. We expect the fastest growth in pharmaceutics, machine-building, including railway engineering, aircraft manufacturing, and electronics. Tourism, the IT sector and agriculture will also grow at an accelerated pace.

Overall, our forecast remains moderately conservative. External price conditions could exceed our expectations, but remaining risks can provoke temporary deviations from the projected growth trajectory. Therefore, our economic policy should focus on increasing economic flexibility and resilience, and on relaunching the investment cycle.

The budgetary framework we are presenting creates room for a further softening of monetary factors and a recovery in investment activity. In itself, it is a necessary, but, as the mathematicians say, insufficient condition for sustainable growth.

What is required is the implementation of pro-active structural changes. In this regard, it is necessary to work on the financial rehabilitation of companies, concentrate taxonomy-based support on priorities and prioritised projects, enhance reciprocal responsibility of investors and users of services based on long-term contracts with shared commitments, and expand investment-funding sources.

Restraints are still imposed by the labour market, where unemployment remains at a very low level throughout the projection period. As a remedy, we will continue to implement programmes designed to enhance education quality, retrain personnel, introduce technologies, and upgrade labour management so as to boost productivity.

To increase project payback in a situation where our access to outside technologies is limited, we have created all mechanisms and amassed resources for implementing technological sovereignty projects, as well as AI and robotics projects. We will also support plans to purchase advanced Russian products.

All these issues are reflected in the plan of structural changes. The Government has been focusing on them. Not long ago, the majority of these were discussed by participants in the strategic session on the national investment model. Ultimately, all of this creates a foundation for implementing the forecast along with the draft budget that has been drawn up.

I ask you to support the forecast.

Mikhail Mishustin: Thank you.

Now let us look at the budget.

Over to you, Mr Siluanov.

Anton Siluanov: Mr Mishustin, colleagues,

Key priorities of the draft budget for the next three-year period include measures to fulfil the state's social obligations, financial support for the country's defence and security requirements, support for participants in the special military operation and their families, ensuring technological leadership and infrastructure development. Mr Mishustin, you have set forth all these priorities in your opening remarks.

The fulfilment of social obligations is our primary priority. There are plans to adjust pensions and wages for inflation. Next year, insurance (contributory-service) pensions will be raised twice: by 6.8 percent from 1 February 2027, to compensate for the current year's inflation levels; from 1 April, insurance pensions will be raised by an additional 3.3 percent. We based our estimates on projected wage raises throughout 2026. As of late 2027, average old-age pensions will total 29,904 roubles.

Next year, the subsistence minimum will increase by 6.8 percent to 20,227 roubles. This will allow for an increase in the amounts of benefits and social payments that are calculated based on this indicator.

In 2027, the minimum wage will reach 28,935 roubles, representing a 6.8 percent increase (the projected wage growth for the next year). We will accomplish an objective, set by the President, and will raise minimum wage to 35,000 roubles by 2030. This will help accelerate wage growth for low-income employees.

The children's budget will exceed ten trillion roubles over a three-year period, including the payment of unified child allowance, the provision of maternity capital, and the implementation of housing support programmes for families with children. We will continue to make annual payments for families, reimbursing people with two and more children for part of their income tax payments. These budgetary payments are estimated at over 200 billion roubles over a period of three years. The social infrastructure will also continue to develop.

The draft budget stipulates 1.4 trillion roubles for the healthcare sector. In addition, 5.2 trillion roubles have been allocated in the 2027 budget of the Compulsory Medical Insurance Fund. The grand total is 6.6 trillion roubles which will be spent next year for accomplishing healthcare objectives; this volume will soar by eight percent on 2026. In all, 561 billion roubles will be spent on the Long and Active Life national project; this sum will be spent on the development of healthcare infrastructure, on the prevention of cardiovascular diseases, and on financing the medications supply programmes.

Education. We will provide prioritised support to Russian regions for the construction of schools. We have allocated over 105 billion roubles for the construction of 150 schools by 2030, and will allocate over 200 billion roubles for the major renovation of existing schools.

We have allocated around 70 billion roubles for the renovation of kindergartens and the construction of new preschool facilities. We plan to build over 100 new kindergartens by 2030.

We have also earmarked budgetary allocations for the renovation of vocational schools, the construction of world-class student campuses, and the renovation of university dormitories.

The second strategic priority is financing the country's defence and security needs, as well as social support for special military operation veterans and their families.

The allocated resources will provide for necessary armament and equipment supplies to the Armed Forces, payment of monetary allowance to the military personnel, support for their families, and the modernisation of defence industry enterprises.

The third priority is technological leadership and infrastructure development. We have included around two trillion roubles into the budget for the next three years for the implementation of the national project to secure technological leadership.

We will continue to allocate priority funding for the Means of Production and Automation national project - specifically, 135 billion roubles for three years, which is 27 percent higher than the funding during the current three-year period (2026-2028 годов). Unmanned aerial systems will receive necessary funding. We will increase the capital of the Industry Development Fund to provide concessional loans in industries involved in technological development. The total amount over three years will be over 200 billion roubles for these purposes.

We plan to subsidise part of the expenses incurred by airlines in purchasing aircraft. This is a new support measure for the aviation industry, to maintain the competitive ability of our airlines and aircraft.

We will continue to invest in the development of micro- and radio electronics. We have allocated 520 billion roubles for R&D, as well as for establishing and equipping production facilities over the next three years.

Infrastructure development. Road construction and maintenance will receive over 4.4 trillion roubles in the next three-year period. A further 65 billion will be spent on upgrading public transit, including ground-based electrical transport.

We have earmarked necessary funds for the projects Comfortable Urban Environment, Utilities Infrastructure Modernisation, Dilapidated Housing Demolition, and Airfield Ground Control Network. All these projects will receive necessary resources.

In total, we intend to allocate 6.4 trillion roubles for the technological leadership national projects and infrastructure development in the next three years. Along with private investment, that should create a source of economic growth for the country.

Regions. We plan to implement support measures for regional budget stability, as well as to stimulate infrastructure development, and to promote regions' involvement in national development goals.

To ease the debt burden, we will extend payment deadlines for the regions' budget loans beyond 2030, as instructed by the President. That will free up around 300 billion roubles that the regions will be able to spend on economic and social development.

We will support regions with complex budgets. Our intention is to allocate 100 billion roubles in balancing grants to such regions next year.

We will facilitate regional development by providing treasury infrastructure loans of 150 billion roubles per year, the implementation of master plans for 200 cities and towns, and urban agglomerations, and individual development programmes for regions with low levels of socioeconomic development.

Now, let us turn to the resource backing for the priorities I set out in the report.

The key principles of tax policy remain unchanged: fairness and efficiency. Here are the main proposals and tasks we are addressing over the upcoming three-year period.

First is fostering a competitive environment and bringing the economy out of the shadows. This is a key task in implementing the plan to "whiten" - formalise - economic sectors, including combating "grey" imports. Accordingly, the draft budget provides for additional annual revenues of approximately 500 billion roubles. To level the playing field in the domestic market, it is proposed that VAT be charged at the current standard rate of 22 percent on goods purchased by citizens via cross-border e-commerce. Electronic trading platforms would act as agents responsible for remitting this tax. It is also proposed to introduce a customs duty of 100 roubles per parcel for goods intended for personal use valued at up to 200 euros and shipped from abroad by post; such practices exist in a number of other countries.

Second is the uniform taxation of passive income. To standardise the taxation of personal income, currently ranging from 13 to 22 percent, it is proposed to include passive income in the personal income tax base. What constitutes such income? It includes income from dividends, interest on deposits, transactions involving securities and digital rights, insurance contracts, and so forth. Thus, the tax rate will depend on the amount of income rather than the method or source of its receipt. This aligns with the principle of fairness that underpinned the introduction of the progressive personal income tax scale.

At the same time, as before, the tax rates applied to the monetary allowances of special military operation participants and to regional wage supplements for the Far North will remain at the existing levels of 13 and 15 percent.

Furthermore, regarding the taxation of passive income, it is proposed to maintain a tax-exempt threshold for deposits of 1 million roubles, adjusted in line with the Central Bank's key rate; thus, the preferential treatment for small deposits will be preserved. The standardisation of the progressive personal income tax scale will affect no more than 6 percent of citizens.

It is also proposed to require mutual investment funds to pay corporate profit tax at a rate of 15 percent on passive income received, such as dividends, interest from equity participation, royalties, rental income, and so forth. However, when income is distributed, unit holders will be able to claim a credit for the profit tax paid by the funds.

A proposal has also been made to raise the profit tax rate on dividends paid to non-residents into "Type C" accounts to 35 percent.

The next proposal involves fine-tuning the taxation of natural resource rents in the mining and metals sector. It is proposed to levy a tax, at rates of 20 or 30 percent, depending on the type of activity - on the additional income generated by increases in global prices (in rouble equivalent) for solid minerals relative to a baseline period (calculated on the basis of 2025 figures); this measure will improve the fairness of how natural resource rent revenues are shared between businesses and the state.

In addition to the tax measures just discussed, plans are in place to optimise expenditures by focusing on public sector efficiency, strengthening the principles of means-testing and targeted assistance in social support programmes, enhancing the returns on state programmes, and prioritising the completion of construction projects already underway. The total volume of budget resources generated through this optimisation will exceed 2 trillion roubles annually.

Budget parameters.

Mr Mishustin, you have already set the budget parameters. Next year, expenditure will amount to 48.8 trillion roubles and revenue to 43.3 trillion roubles, with the budget deficit projected at around 2 percent for the coming three years. In 2027, the budget deficit will stand at 2.2 percent of gross domestic product.

In conclusion, I would like to note that the draft budget is balanced, which is crucial for maintaining macroeconomic stability, reducing inflation and interest rates, and increasing the real disposable incomes of the population, which will rise by 1.4 percent next year.

The budget is resilient to various scenarios. From next year, over a three-year horizon, the base price of Urals oil is set at $50 per barrel, meaning that all obligations will be financed at that oil price level. Should market conditions prove more favourable, we will replenish the National Wealth Fund.

A smooth transition to the budget rule by 2029 is being secured. During the transition period - in 2027-2028 - the expenditure ceiling will exceed the structural level by 1.5 trillion roubles and 0.5 trillion roubles, respectively.

The revenue base and its resilience will continue to be consolidated. The share of non-oil-and-gas revenues will consistently exceed 80 percent of total revenues. The non-oil-and-gas deficit will decrease to 5 percent of gross domestic product, the lowest level since 2008.

Mr Mishustin,

Colleagues,

The draft law has been prepared, and appended to it are a further 11 legislative acts - the so-called accompanying bills - which are required to implement the proposals incorporated into the budget.

I would like to request that the submitted proposals be approved.

Mikhail Mishustin: Thank you, Mr Siluanov.

Following today's discussion, all remaining issues need to be finalised in accordance with the Budget Code.

We must submit the draft federal budget for the coming three-year period to the State Duma by 1 October.

Although the elections to the new parliament have only recently concluded and the final results have yet to be certified, we must organise our work as promptly as possible, and set out our position in the regions and in the State Duma committees, once they have been formed, so that from the very first days of next year we can begin implementing the planned financing immediately, without delay.