*
Price caps squeeze Russia's energy export earnings
*
Russia dipping into reserves to cover budget deficit
*
Monthly budget deficit narrowed in Feb
(Adds details on National Wealth Fund)
By Darya Korsunskaya and Alexander Marrow
March 6 (Reuters) - Russia's federal budget deficit
widened to 2.58 trillion roubles ($34.19 billion) in the first
two months of the year as Moscow sharply raised expenditure
while revenue fell amid slumping oil and gas takings, the
finance ministry said on Monday.
Russia's economy proved unexpectedly resilient in the face of Western sanctions imposed last year over the Ukraine crisis, but a return to pre-conflict levels of prosperity may be far off as more government spending is directed towards the military and price caps squeeze Moscow's crucial energy export earnings.
Oil and gas revenues were 46.4% lower at 947 billion roubles in Jan-Feb than in the same period last year, the finance ministry's preliminary data showed, with overall budget revenues for the combined two months down 24.8%.
The finance ministry attributed the drop to a decrease in income tax receipts. It says higher spending is partly linked to advance funding for certain contracted expenses, without disclosing details.
Spending was 51.5% higher in the first two months of 2023, at 5.74 trillion roubles. In the same period last year, Russia had recorded a surplus of 415 billion roubles.
The finance ministry stopped publishing monthly budget fulfilment data last year. Monday's data suggests that the monthly budget deficit narrowed to 821 billion roubles in February, down from a record 1.76 trillion roubles in January. Reining in the deficit may ease market concerns about tighter monetary policy. The central bank has warned that a further widening of Russia's budget deficit may compel it to raise interest rates from current levels of 7.5%.
The bank will next meet to set interest rates on March 17.
This year's deficit is already approaching the 2.93-trillion-rouble target for 2023. Finance Minister Anton Siluanov has pledged to stick to plans for a budget deficit of no more than 2.3% of GDP this year.
RAINY DAY FUND SPENDING
Moscow relies on income from oil and gas - last year around 11.6 trillion roubles - to fund its budget spending, and has been forced to start selling international reserves to cover a deficit stretched by the cost of the Ukraine conflict. Russia has dipped into its National Wealth Fund (NWF), spending 131.7 billion roubles worth of Chinese yuan and gold from its rainy day fund in February, more than three times the amount spent in January.
Sanctions have frozen around $300 billion roubles worth of Russia's reserves abroad, giving Moscow less room to manoeuvre financially.
The NWF fell to $147.2 billion as of March 1, equivalent to 7.4% of GDP and down from $155.3 billion a month earlier. The fund's liquid assets amounted to 6.45 trillion roubles, or 4.3% of GDP, at the start of March.
($1 = 75.4705 roubles)
(Reporting by Darya Korsunskaya and Alexander Marrow
Editing by Gareth Jones)
