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Defense spending set to rise 27%
Russia plans to allocate 17.1 trillion rubles for defense next year, the largest military budget since its 2022 invasion of Ukraine, Reuters reported, citing government documents it obtained.
The proposed spending represents a roughly 27% increase from the original budget of 13.5 trillion rubles. Russia is expected to spend a total of 50 trillion rubles on defense over the next three years.
The government must submit its budget proposal to parliament by the first of next month. This year’s defense spending plan stands at 12.1 trillion rubles, though actual expenditures are classified and cannot be independently confirmed.
Falling energy revenue strains finances
The military buildup comes as lower energy revenue and a widening deficit put pressure on Russia’s finances. The government reduced its forecast for oil and gas revenue this year from 8.9 trillion rubles to 7.6 trillion rubles.
Russia now expects its budget deficit to reach 3.2% of gross domestic product this year, up from an earlier estimate of 1.6%. Overall government spending is projected to rise 13.2% to 48.6 trillion rubles, equal to 20.9% of GDP.
Government debt is forecast to increase from 19.9% of GDP this year to 21.7% next year, exceeding the 20% level Russian authorities consider safe.
New taxes planned to narrow deficit
Russian authorities last week announced tax increases scheduled to take effect next year. The measures include a new windfall tax on metals and mining companies that is expected to raise about 200 billion rubles annually.
The government also plans to raise the dividend tax rate for companies and investors from countries Russia designates as “unfriendly.” The rate would increase from 15% to 35%.
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