The article is aimed at analysing budget risks related to activities of development institutions and ways of reducing such risks. The paper looks at financing models of development institutions in Russia, including the following models: budget fi nancing, public guarantees, capital contributions and concessional deposits. The analysis of the Russian development institutions shows that, although, in general all measures of the government support are in place, in a number of key organizations there is a mismatch between market liabilities and non-market assets, which create budget risks. The list of such organizations includes Vnesheconombank, Russian Agricultural Bank and DOM.RF (Russian Agency for Housing Mortgage Lending). The article further analyses the case of budget support for the Vnesheconombank in 2015–2018, which is the largest case of public support for the development institution in Russia. The authors come to the conclusion that the main source of risk is political interference in the activities of the development bank and absence of compensation for financing of low-return projects. Based on the analysis of international best practices the recommendations are given on reduction of budget risks related to development institutions, including such policies as provision of public guarantee, loan portfolio breakdown into subsidized and non-subsidized loans; regular budget transfers and concessional deposits. The article concludes that in order to reduce budget risks related to development institutions in Russia the Government needs to develop a transparent framework of compensation evaluation and establishment of mechanism of regular compensation for their activities.