Russia in the debt spiral?: Putin’s war costs are apparently significantly exceeding Moscow’s budget plans

As a result of Western sanctions, Russia is now largely cut off from foreign financial sources. In order to be able to continue financing the war against Ukraine, Moscow has already done so in the past several measures implemented.

At the beginning of this year Putin had VAT increased to 22 percent. As a result, many Russians complained about “skyrocketing food prices” and expressed their displeasure about it on social media.

In addition, Russia’s Finance Minister Anton Siluanov announced in September last year that an increase in new debt would have to be accepted in order to cover the increasing budget deficit. At the time, he explicitly did not rule out the possibility that the Kremlin’s austerity measures could impact the lives of many Russians: “We will have less money for our priorities.”

Russia’s economic deficit continues to grow

Economic experts are now predicting as part of the “Bloomberg” analysis that Russia’s defense spending in 2026 could exceed the original budget plans by four to five trillion rubles (the equivalent of around 44 to 55 billion euros). According to analysts, this is almost 40 percent more than originally planned.

At the same time, according to experts, the budget deficit already reached 6 trillion rubles (around 66 billion euros) in the first five months of the year, around 60 percent above the target value for the year as a whole.

Due to high interest rates and the increasing need for financing for the war the costs of so-called debt service continue to risepredict the experts. Debt service means the sum of all payments that a debtor has to make and includes both interest and repayment.

Moscow has currently budgeted almost four trillion rubles (44 billion euros) for the current year to make interest payments and service its national debt. This corresponds to around nine percent of the federal budget and covers debt service the Russian state’s fifth largest expenditure item.

“Bloomberg” also calculates that Moscow will probably do so in the next ten years Interest payments amount to around 15 percent of its gross domestic product would have to do. The amount corresponds roughly to the current size of the entire Russian national debt.