The Kremlin is preparing to increase spending on the war by 40 per cent, despite the ‘hole’ in the budget
The Russian government is preparing to significantly increase spending on the war in 2026, despite the growing budget deficit. By early June, the Russian Federation’s budget deficit had reached 6 trillion roubles, exceeding the figure for the whole of last year.
According to Bloomberg, war spending in the 2026 budget could be 40 per cent, or 4–5 trillion roubles, higher than originally planned.
Initially, the budget allocated 12.9 trillion roubles to the ‘national defence’ line item, which is slightly less than the previous year, when military expenditure stood at 13.5 trillion roubles. At the same time, the actual military budget in 2026 could rise to almost 18 trillion roubles. This would account for 41 per cent of all planned expenditure by the Russian treasury, estimated at 44 trillion roubles.
If expenditure under the ‘national security’ heading is also taken into account – which includes funding for the Ministry of Internal Affairs, the Russian Guard, the Investigative Committee and the security services, total expenditure on the security sector could reach 21.8 trillion roubles, or almost half the budget.
To finance additional military expenditure, the government is considering cuts to civilian budget items and the use of accumulated reserves. Part of the funds is planned to be raised through additional government borrowing by issuing federal loan bonds.
Last week, the State Duma passed a law allowing the government to exceed the established spending and public debt limits without amending the budget law.
Against this backdrop, Elvira Nabiullina, Governor of the Central Bank of Russia, has temporarily disappeared from the public eye. She missed the St Petersburg Economic Forum and meetings with Vladimir Putin, citing ill health.
According to Bloomberg, the Central Bank of Russia is effectively helping to cover the budget deficit through repo transactions with banks. Banks purchase federal government bonds, use them as collateral to obtain loans from the Central Bank, and then reinvest the funds in the purchase of federal government bonds. The volume of such transactions has reached 4.6 trillion roubles.
Bloomberg also notes that senior officials at the Central Bank and the Ministry of Finance had previously warned Vladimir Putin that rising war expenditure was placing an excessive burden on the budget and the economy. They called for military spending to be curbed, but Putin backed the position of the Ministry of Defence, which insisted on increased funding.
According to estimates based on data from the Russian Ministry of Finance, Russia’s federal budget expenditure on the war reached 5.908 trillion roubles in the first quarter.
Compared with the same period last year, spending on the military and arms production rose by 29.9 per cent. Compared with the first quarter of 2024, this figure rose by 68.7 per cent; compared with 2023, by 129 per cent; and compared with the first quarter of 2022, it increased 4.6-fold.
As a result, the share of military spending in the Russian budget reached 46 per cent for the first time since the start of the full-scale war, whilst its share of state revenue reached 65 per cent.
