Russia Faces $133B Budget Deficit 2025-2027 Amid Rising Military Spending

Russia is facing a growing budget deficit projected to reach approximately $133 billion between 2025 and 2027, driven by declining oil and gas revenues, increased military spending, and a strong ruble that has squeezed budget revenues. The 2025 deficit alone is expected to be around $61 billion, with the consolidated budget deficit forecast at 5.1% of GDP in 2025-2027, the largest since the COVID-19 pandemic. Defense and security expenditures remain the fastest-growing budget categories, consuming nearly a third of all spending and exceeding $135 billion annually, while non-oil revenues stagnate. The government plans to cover the shortfall through increased domestic borrowing and withdrawals from the National Wealth Fund, though high interest rates of 18% make debt servicing costly, consuming about 8% of budget expenses. Economic growth forecasts have been revised downward, further shrinking the revenue base and prompting discussions of austerity measures, tax hikes, and spending cuts, though such measures are unlikely to close the budget gap. Overall, Russia's wartime economy is showing signs of strain as energy income falls and military outlays rise, challenging the Kremlin's financial resilience.