Russia's military budget surges as war priorities dominate
The law regarding Russia's federal budget, signed by Vladimir Putin, includes a 25% increase in military spending compared to the current year, according to Reuters, citing a legal document published on Sunday in the official online journal.
The published budget assumptions cover the years 2025-2027, with the highest expenditures in the "National Defence" category planned for 2025, followed by a gradual decrease in subsequent years.
Russian military spending is growing
Total expenses related to the "special military operation"—as the Kremlin refers to the war it instigated in Ukraine—and the funding of other uniformed services make up one-third of the state budget expenditures. However, these expenditures are not transparent and are not subject to public oversight.
Reuters points out that by approving the budget in this form, the Russian government admits that military spending for the ongoing war is a priority, and the expenses incurred for this purpose exceed the planned outlays 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 CAD 176 billion, which accounts for about 6.3% of Russia's GDP.
Meanwhile, in 2026, military spending is expected to be 12.8 trillion roubles (CAD 167 billion), and in 2027, 13.1 trillion roubles (CAD 171 billion). Overall, Russia intends to allocate at least 40% of the budget to defence and national security from 2025-27.
War economy
Since 2022, Moscow has effectively reoriented its economy towards wartime activities, which included intensive military industry development and a significant increase in employment in this sector. Russia's military budget for the current year was already at a record high, exceeding by 70% that of 2023. Together with investments 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. Market analysts predict they could rise even further to 23% by the end of the year. This is an unusual situation during wartime, as central banks typically avoid slowing down economic activity. "The Economist" estimates that the Kremlin's actual spending on the war is much higher than the official figures provided by the Putin regime.
