Military spending reaches record levels
Russia’s draft 2027 budget prioritizes military spending over social welfare by increasing national defence spending by 41% to a record RUB 17.15 trillion, which accounts for 35.2% of all federal spending and 6.9% of GDP. This amount is significantly higher than the RUB 12.1 trillion set in the 2026 budget law. The addition of RUB 4.2866 trillion for national security and law enforcement brings the total allocation for the military and security services to 44% of all federal spending, according to calculations from The Bell. Finance Minister Anton Siluanov told deputies that the plan is "realistic and balanced" after the State Duma passed the 2027-2029 budget in its first reading on October 29. The budget concedes that the war bill cannot be held down, and much of the 41% rise has already been spent. Federal spending this year is expected to reach RUB 48.5 trillion, which is RUB 4.5 trillion above the RUB 44 trillion written into the 2026 law. Janis Kluge, an economist at the Berlin-based SWP institute, put the rise in military spending in the first half of 2026 at 30% year-on-year. This follows a 2026 law that assumed defence would fall from the RUB 13.6 trillion of 2025. Siluanov warned in a February letter that war spending would exceed the plan by at least RUB 2 trillion, and Bloomberg reported that Defence Ministry sources were talking of a shortfall of up to RUB 5 trillion by mid-June. An economist at a Russian think tank told The Bell that a reduction in spending relative to GDP is only possible if the war ends. "If it doesn’t, this three-year plan simply won’t be implemented, as has been the case in all previous years," the economist said.
Deficit and debt challenges
The 2027 draft targets a deficit of RUB 5.44 trillion, or 2.2% of GDP, after the 2026 deficit reached an estimated RUB 7.345 trillion. This 2026 figure represents 3.2% of GDP, much higher than the 1.6% expected in the original law. Two monthly surpluses in August and September cut the January-September shortfall to RUB 5.186 trillion, or 2.2% of GDP, according to Finance Ministry data from October 9. Net borrowing will rise 22.5% to RUB 6.14 trillion next year to finance the budget. State debt is forecast to hit 21.7% of GDP, or RUB 54 trillion, at the end of 2027, which is above the 20% level authorities regard as safe. President Vladimir Putin told the Valdai Club on October 1 that Russia’s debt stood at 17% of GDP. Debt servicing will cost RUB 4.57 trillion in 2027, or 9.4% of federal spending, which is a massive increase from the RUB 784 billion paid in 2020.
| Category | 2026 Law (RUB bn) | 2027 Draft (RUB bn) | % Change |
|---|---|---|---|
| Total expenditure | 44,069.7 | 48,740.4 | +10.6% |
| National defence | 12,121 | 17,147.4 | +41.5% |
| National security | 3,827 | 4,286.6 | +12.0% |
| Social policy | 7,839 | 6,650.5 | -15.2% |
| State debt service | 3,900 | 4,570.1 | +17.2% |
Revenue shifts and social cuts
Oil and gas revenue will supply only 16.2% of the RUB 43.3 trillion federal revenue in 2027, falling from 41.6% in 2022. In the first nine months of the year, oil and gas receipts fell 17.2% year-on-year to RUB 5.47 trillion, or 18.5% of federal revenue. Non-oil revenue rose 18.8% to RUB 24.17 trillion after the government raised VAT to 22% in January. The budget rests on a cut-off oil price of $50 a barrel in the fiscal rule. The government shifts the war bill onto consumers and savers through taxes on households and businesses. The move to put deposit interest onto the progressive income tax scale will raise RUB 1.02 trillion in 2027, while the latest round of income and consumption tax rises will add about RUB 1.5 trillion. The car recycling fee is expected to bring in RUB 1.78 trillion in 2027 and RUB 2.61 trillion by 2029, while voluntary contributions from business will add RUB 471.5 billion this year. The Bank of Russia must hand over RUB 216 billion of profit in 2027. Federal spending on social policy falls 15.2% to RUB 6.65 trillion, while healthcare and the national economy each drop 4.6% compared to the 2026 law. In real terms, federal spending on education and healthcare falls by 4.8% and 10.6% respectively, based on the government forecast of 6.8% inflation. Across the whole budget system, education and healthcare grow by 3.9% and 3.1% in real terms. Any overrun on the military would put the war ahead of welfare for the first time in modern Russian history.
