Russia Set to Exceed Military Budget by 2 Trillion Rubles in 2025

Russia’s Fiscal Challenges in 2025

According to ХВИЛЯ: In 2025, Russia’s war-related spending in Ukraine is projected to surpass its budgeted level by at least 2 trillion rubles, equivalent to about $28 billion. Under a worst-case scenario, the overshoot could reach 4 trillion rubles. In February 2025, Finance Minister Anton Siluanov asked the government to freeze non-military expenditures totaling 2.9 trillion rubles for the year. He also requested similar freezes of 5.4 trillion rubles in 2027 and 7.1 trillion rubles in 2028.

Defense and security allocations for 2025 stand at 16.84 trillion rubles, accounting for nearly 40% of the entire national budget. The Kremlin’s budget deficit target for 2026 is 3.8 trillion rubles, yet in the first four months of 2025 alone, the actual deficit has already reached 5.9 trillion rubles-equivalent to 2.5% of GDP and the highest level since 2022.

Economic Growth Forecasts Revised Downward

Russia’s GDP growth forecast for 2026 has been cut to 0.4%. Projections for 2027 and 2028 stand at 1.4% and 1.9%, respectively-down from earlier estimates of 2.8% and 2.5% made in September. In January, the Finance Ministry had already instructed government agencies to reduce non-core spending by 10%.

Siluanov remarked: 'Our reserves are not unlimited. We cannot afford weak points in our finances while such large-scale transformations are taking place in the world.'

Amid a surge in oil prices-which topped $100 per barrel for the first time since 2022-Russia gained 200 billion rubles in excess revenue from energy exports in April. However, in March, energy export revenues fell roughly 200 billion rubles short of expectations.

• Economist Sofia Donets noted: 'The economy is not in great shape, but it is resilient. Still, the budget is the number one topic-in the media, in central bank statements, and in behind-the-scenes discussions.'
• Another economist, Renat Suleymanov, emphasized: 'What development, investment, or capital allocation can we talk about when 40% of the federal budget goes to defense and security? Tanks and shells have no consumer value.'
• Aleksandra Prokopenko added: 'The Finance Ministry needs money for the war, so no matter what happens, cuts target procurement, subsidies to companies, and funding for state institutions-not defense and security.'

Overall, Russia’s budget situation in 2025 highlights severe financial strains driven by war expenditures and the resulting need to slash other spending to sustain defense priorities.

These figures underscore a critical fiscal crisis in Russia, as rising war costs heavily impact the state budget. Reduced spending on social programs and other areas could harm the population, increasing social tensions. The situation also reflects the broader economic difficulties the country faces due to sanctions and global economic shifts.

As the financial strain intensifies, the situation surrounding Russia's budget deficit is becoming increasingly dire. In a recent outburst, a prominent lawmaker expressed frustration over the staggering 11-trillion-ruble deficit, highlighting the growing concern over fiscal management amid ongoing military expenditures. This reflects the broader economic challenges that the country is facing as it navigates through these turbulent times.