The new draft budget of the Russian Federation for 2025, proposed by the Russian government, shows that the Kremlin is ready to cut important expenses to finance the war against Ukraine.
Points of attention
- Russia's draft budget for 2025 shows a significant increase in defense spending at the expense of social expenses, demonstrating the country's prioritization of funding the war against Ukraine.
- The increase in defense spending to 6.2% of GDP may lead to inflationary pressures in the Russian economy, affecting economic stability.
- With defense spending comprising about 40% of all budget payments in 2025, Russia is redirecting resources from social and economic needs to prioritize the war effort.
- The proposed budget reflects a 25% increase in defense spending compared to 2024, signaling a substantial shift towards military expenditures over domestic priorities.
- The budget allocation for defense in 2025 exceeds combined spending on education, health care, social policy, and the national economy, highlighting the significant emphasis on military funding.
The Russia is cutting important expenses to finance the war against Ukraine
On September 30, 2024, the Russian government submitted to the State Duma the draft budget for 2025, which foresees a 5% increase in expenditures (excluding inflation) to 41.5 trillion rubles ($447 billion).
The Ministry of Defense of Great Britain reported this on the X social network with reference to intelligence data.
The proposed budget calls for a roughly 25% increase in defense spending in 2025 compared to the 2024 budget. In general, defense spending will make up 32% of the 2025 budget, compared to the pre-war 2021 — when this figure was 14.5%.
The new budget shows that Russia continues to prioritize financing the war over domestic priorities, the British agency believes, noting that, for example, social spending will be cut by 16% in 2025.
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Russia increases defense spending
Demand continues to outstrip supply in the Russian economy, and the 2025 budget increase is likely to worsen this situation. This will almost certainly add to inflationary pressures, which remain a key concern, with inflation hovering around 9% in August 2024.
Russian authorities plan to increase defense spending to 6.2% of the country's gross domestic product next year amid the war against Ukraine.
According to the draft budget for 2025, the Russian government intends to increase defense spending to 13.2 trillion rubles ($142 billion) in 2025 from 10.4 trillion rubles planned for this year, which is 6.2% of gross domestic product
Thus, military spending is planned to be reduced to 5.6% of GDP in 2026 and to 5.1% in 2027.
Russia's national defense and internal security spending is also projected to account for about 40% of Russia's total budget outlays in 2025, as Putin continues to shift the economy to war amid Russia's 2.5-year-old invasion of Ukraine .
The amount for defense is greater than the combined allocations for education, health care, social policy and the national economy.
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