Russia faces $28 billion budget gap as war costs surge

Russia’s war against Ukraine is projected to create a fiscal shortfall of at least 2 trillion rubles (about $28 billion) by 2026, far exceeding the state budget’s original war‑spending estimate. Finance Minister Anton Siluanov’s February letter, cited by the Financial Times, warned that military outlays could rise to 4 trillion rubles in 2026 and even higher in 2027‑2028. To cover the gap, the government is considering freezing non‑defence spending of 2.9 trillion rubles in 2026, with larger freezes planned for the following years.

The war has already driven the deficit for the first quarter to 5.9 trillion rubles, 2.5 % of GDP, well above the 3.8 trillion‑ruble annual forecast. Defense and security now account for roughly 40 % of the total budget, with 16.84 trillion rubles allocated so far. Oil price spikes have offered only temporary relief, and growth forecasts have been cut to 0.4 % for 2026, with modest rebounds of 1.4 % and 1.9 % projected for 2027 and 2028.