Russia amplifies war budget: Defence spending to outpace GDP
The law concerning Russia's federal budget, signed by Vladimir Putin, includes a 25% rise in military spending compared to the previous year, reported Reuters, referencing a legal document published on Sunday in the online official journal.
The budget projections published cover the years 2025-2027, with the highest spending in the "National Defence" category anticipated in 2025, with a gradual reduction in the years following.
Russian military spending is growing
Total expenses related to the "special military operation" - as the Kremlin refers to the conflict it initiated in Ukraine - and the financing of other uniformed services comprise one-third of the state budget expenditures. However, these expenditures lack transparency and are not subject to public scrutiny.
Reuters highlights that by endorsing the budget in this manner, the Russian government acknowledges that military spending for the ongoing conflict is a priority, and the costs incurred for this exceed the planned budgets for education, healthcare, and social policy combined.
The independent Russian portal Meduza reported that defence spending in 2025 amounts to about 13.5 trillion roubles, or approximately £99 billion, which constitutes about 6.3% of Russia's GDP.
Meanwhile, in 2026, military spending is expected to be 12.8 trillion roubles (£94 billion), and in 2027 - 13.1 trillion (£96 billion). Overall, Russia intends to allocate at least 40% of the budget to defence and national security from 2025 to 2027.
War economy
Since 2022, Moscow has thoroughly reoriented the economy towards wartime activities, which involved intensive development of the military industry and a notable increase in employment within this sector. Russia's military budget for the current year was already at a record high, exceeding by 70% that of 2023. Alongside investment in the security sector, it accounted for 8.7% of GDP.
In October, Russia's central bank raised interest rates to 21%, the highest level in two decades, and market analysts anticipate they could rise further to 23% by the end of the year. This is an uncommon situation during wartime, as central banks usually avoid slowing down economic activity. "The Economist" estimates that the Kremlin's actual spending on the war is much higher than the official figures released by the Putin regime.
