Putin's Budget Pushback

GFN – MOSCOW: Russia's Finance Ministry and central bank have warned President Vladimir Putin that defense spending tied to the Ukraine war is on an unsustainable path, signaling growing internal pressure as the federal budget deficit widens.

Senior officials at the Finance Ministry and central bank have advised the Kremlin that current projected defense expenditure risks pushing the budget deficit dangerously wide, according to people familiar with the matter and documents reviewed by Bloomberg News.

Moscow has earmarked 16.84 trillion rubles ($238 billion) for defense and security in its 2026 budget, equivalent to roughly 40% of total federal outlays, while the deficit reached 5.9 trillion rubles ($82 billion) in the first four months of the year, or about 2.5% of GDP. Internal Finance Ministry projections place the immediate funding gap from incremental military spending at 2 trillion rubles ($28 billion), with a possible widening to 4 trillion rubles ($56 billion) under a negative scenario extending into 2027 and 2028.

“Senior government officials have warned Russian President Vladimir Putin that spending on the war in Ukraine is on an unaffordable path,” Bloomberg News reported.

Defense Ministry officials and several within the Kremlin have pushed back on calls for restraint, arguing that reductions in military outlays would weaken broader economic activity given the share of Russian industry tied to defense contracts. Finance Minister Anton Siluanov has said surplus energy revenue in April was largely offset by weaker March collections, underscoring the volatility of the receipt base supporting the war effort.

The disclosures echo earlier reporting on strains in Russia's fiscal position following sustained Western sanctions and elevated military demands, and follow earlier coverage of widening budget pressure during ongoing peace-talk discussions. The development reflects broader efforts by Russian economic policymakers to surface fiscal constraints within a system where defense priorities have driven federal spending since 2022.