Russia prioritizes massive defence budget surge amidst war focus

In 2025, defence spending is projected to be 13.5 trillion rubles (approximately CAD 186 billion), which marks an increase of 30% compared to the current year. This amount constitutes 6.31% of Russia's GDP.

Meanwhile, in 2026, military spending is expected to amount to 12.8 trillion rubles (approximately CAD 176 billion), and in 2027, to 13.1 trillion rubles (approximately CAD 181 billion). In total, Russia intends to allocate at least 40% of the budget to defence and national security over the years 2025-27.

Since 2022, Moscow has thoroughly reoriented the economy towards wartime activities. This has included, among other efforts, the intensive development of the military industry and a significant increase in employment in this sector. Russia's military budget for the current year is already at a record high and exceeds the 2023 level by 70%. Along with investments in the security sector, it constitutes 8.7% of the GDP.

The budget law still needs approval from the upper house of parliament, the Federation Council, and then must be signed by Vladimir Putin.

The central bank of Russia raised interest rates in October to 21%, the highest level in two decades, and market analysts predict they could rise to even 23% by the end of the year. This is an unusual situation during wartime when central banks typically avoid constraining economic activity. "The Economist" estimates that the actual expenses the Kremlin incurs for the war are much higher than those officially reported by Putin's regime.

Almost 560,000 soldiers from internal security forces, many of whom have been deployed in occupied Ukraine, are funded outside the defence budget. The same applies to private military companies that have been established across the country.