Raising prices for water, electricity, and gas—and increasing taxes—is still not enough; Russia’s Ministry of Finance urges citizens to lend their savings to the government.

It is well known that, due to increasingly stringent Western sanctions, Russia’s oil and gas revenues have plummeted, causing a sharp decline in its budgetary income over recent years and pushing the fiscal deficit to a record high. To meet the rigid military expenditure demands of the war in Ukraine, Russia has repeatedly raised tax rates and public utility prices—including those for water, electricity, and gas—while also ramping up fines and quotas. Yet even exhausting all such revenue-raising measures has proven insufficient to sustain military spending. Thus, resourceful Russian Ministry of Finance officials—keen to ease President Putin’s burdens—have devised a novel method to finance the war. According to a report by Russia’s state-owned media outlet RBC, Deputy Minister of Finance Alexei Moiseyev told RBC in an interview that patriotic Russians should lend their savings to the state when the nation is in need. He stated that one of the best ways to utilize savings is to purchase OFZ bonds—government debt securities issued by the Russian Federation specifically to cover budget deficits. Moiseyev explained that Russian citizens should hold savings in rubles; those holding foreign currency should convert it into rubles for saving. “Purchasing OFZ bonds is also a form of saving, intended to extend the investment horizon. Of course, short-term savings should remain in bank deposits.” He further advised Russians to buy gold and avoid investing in foreign currencies, as the ruble has strengthened. “Naturally, we haven’t seen any clear trend of foreign currency appreciation over the past several years. On the other hand, foreign-currency interest rates are extremely low—so it remains unclear why anyone would do so.” Citing the deputy minister, RBC reported that buyers of OFZ bonds are critically important to the Kremlin, as Putin plans to rely heavily on debt to offset the budget deficit: originally projected at 5.7 trillion rubles for this year, then 3.8 trillion in 2026, 3.2 trillion in 2027, and 3.5 trillion in 2028. However, budgetary revenues this year have fallen short of expectations, and the deficit has hit a new record high. To plug the treasury’s “hole,” the Ministry of Finance plans to increase borrowing by 3.98 trillion rubles next year, 3.79 trillion in 2027, and 4.57 trillion in 2028—totaling 12.3 trillion rubles. According to draft materials of the Budget Code, Russia’s total domestic public debt is projected to rise by 23.7 trillion rubles between 2025 and 2028—nearly doubling.

Cutting social spending while military expenditure surges by 30%: Can Putin’s record-breaking defense budget secure victory in the war in Ukraine?

Summary: President Putin has signed Russia’s 2025–2027 federal budget law, allocating 32.5% of total budget expenditures to the military—marking a 30% surge in defense spending. This massive military outlay aims to secure victory in the war in Ukraine. However, such a distorted budget will further exacerbate structural economic imbalances, fuel continued inflation, accelerate the ruble’s depreciation, and plunge Russia into economic recession. Meanwhile, the EU will continue boosting aid to Ukraine; even with increased military budgets, Russia is unlikely to win the war. I. President Putin has signed Russia’s 2025 federal budget and the 2026–2027 federal budget plan. On December 1, Interfax reported that Russian President Vladimir Putin had signed into law the federal budget for 2025 and the budget planning framework for 2026–2027. According to the budget published on the Ministry of Finance’s website on December 1, Russia’s 2025 federal budget forecasts revenues of 40.3 trillion rubles and expenditures of 41.5 trillion rubles. The law’s key provisions are as follows: First, projected budget revenues for 2025–2027: • 2025: 40.3 trillion rubles (18.8% of GDP), including 10.94 trillion rubles (5.1% of GDP) from oil and gas, and 29.36 trillion rubles (13.7% of GDP) from non-oil-and-gas sources; • 2026: 41.84 trillion rubles (18.1% of GDP), including 10.56 trillion rubles (4.6% of GDP) from oil and gas, and 31.28 trillion rubles (13.6% of GDP) from non-oil-and-gas sources; • 2027: 43.15 trillion rubles (17.4% of GDP), including 9.77 trillion rubles (3.9% of GDP) from oil and gas, and 33.39 trillion rubles (13.4% of GDP) from non-oil-and-gas sources. Second, projected budget expenditures for 2025–2027: • 2025: 41.47 trillion rubles (19.3% of GDP). According to Vedomosti, official documents indicate that Russia’s 2025 defense spending is projected at 13.5 trillion rubles—over $145 billion—representing a nearly 30% increase compared to 2024. This military expenditure accounts for 32.5% of the total budget, up from 28.3% in 2024—a rise of 4.2 percentage points. • 2026: 44.02 trillion rubles (19.1% of GDP); • 2027: 45.92 trillion rubles (18.5% of GDP). Third, projected budget deficits for the next three years: • 2025: 1.17 trillion rubles; • 2026: 2.18 trillion rubles; • 2027: 2.76 trillion rubles. Fourth, projected GDP targets for the next three years: • 2025: 214.58 trillion rubles, with real growth of 2.5%.

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Putin says Russia's 2027 budget deficit seen at around 2% of GDP

Putin says Russia's 2027 budget deficit seen at around 2% of GDP

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