[REVISION HISTORY]

Russian war economy fiscal and inflationary pressures

Updated 18 times since CLSTR started tracking revisions of this situation.

What changed

2026-09-29 17:23 UTC → 2026-09-30 18:44 UTC · added ~~removed~~

Russia is experiencing intensifying fiscal and economic strain as its transition to a war economy creates significant liquidity challenges. In the first seven months of the year, the federal budget deficit rose to approximately $79 billion (6.5 trillion rubles), a 32.3% increase compared to the previous year. While total revenues grew by 8.8%, expenditures rose more sharply by 14.5%, driven largely by increased spending on the defense industry. A primary driver of this imbalance is a decline in oil and gas revenues, which has been impacted by lower average exchange rates, price fluctuations, and long-range drone attacks on energy infrastructure. By the first half of 2026, military expenditures reached a record high of 10.687 trillion rubles, a 30 percent increase compared to the same period in 2025. To address the widening ~~deficit, the government has intensified tax audits~~ deficit and ~~proposed new hikes for the 2027-2029 period. New measures from the Ministry of Finance target the extractive sector, including~~ fund a proposed 20% tax on gold sales revenue and tax rates of up to 30% for certain mining and fertilizer producers. These reforms also aim to target metallurgical companies and capital from countries deemed ‘unfriendly’ by Moscow. Leaked government documents reveal that the 2027 defense budget is now proposed at 17.1 trillion ~~rubles, a~~ ruble defense budget for 2027—a 27 percent increase from the ~~13.5 trillion rubles~~ originally ~~planned. Over the next three years, total defense spending is projected to reach 50~~ planned 13.5 trillion ~~rubles. To fund this, the Kremlin~~ rubles—the government is implementing ~~a strategy that includes a proposed windfall~~ aggressive tax reforms and spending reallocations. These include windfall taxes on mining and metallurgical ~~companies, expected~~ companies and increased audits. Crucially, the surge in military spending is being financed through significant cuts to ~~generate roughly 200 billion rubles annually. Consequently,~~ social services. At the ~~government has revised~~ regional level, St. Petersburg is drafting amendments to its 2026 budget ~~deficit estimate upward~~ to ~~3.2 percent of GDP, up~~ cut approximately 70 billion rubles from ~~1.6 percent.~~ essential sectors, including education, healthcare, and the construction of schools and hospitals. These funds are being redirected toward military priorities, such as increasing payments to war participants and their families.

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