Russia plans to reduce defense spending by $2.4 billion in 2026. The shift comes as the Kremlin faces declining oil revenues and increased reliance on value-added taxes to fund its security apparatus.
The Russian economy is not collapsing, but it is stagnant and suffering high inflation. And this economic decline could be a tipping point, because Russia may run out of liquid reserves, prompting the Kremlin to cut public expenditures.
Russia just admitted something it has spent three years denying: the war is breaking its economy. According to Russian Finance Ministry data, Moscow’s federal deficit hit $62 billion by July — already 25% over its yearly target with five months still to go.
The draft budget has a 16% cut in social spending, prioritizing military funding amid 9% inflation and economic challenges from excess demand, per UK intelligence.
Prime Minister Mikhail Mishustin emphasized the fulfillment of "all social obligations to citizens," even as defense spending is set to consume 40% of the federal budget.