Russia’s military budget hits an all-time high as the economy struggles to keep up

Today the biggest news comes from the Russian Federation. Russia plans to allocate 17.1 trillion rubles, which equals approximately 200 billion dollars, to national defense in 2027. This marks an almost 43 percent increase from the 12 trillion rubles planned for 2026. Military spending would equal 6.9 percent of GDP and 35 percent of all federal budget expenditure. Ukraine's military intelligence reported that around 146 billion dollars is planned for weapons and military equipment for Russian forces.

However, increasing military spending comes at enormous cost as economic growth slows and oil and gas revenues fall. Ukrainian strikes on oil infrastructure add pressure by disrupting refining and fuel deliveries while military spending keeps rising. During the war the Russian authorities have actively increased the tax burden both by raising traditional taxes and by introducing levies.

Higher tax revenues have not prevented the deficit from widening because government spending has risen even faster. Moscow is therefore planning further tax increases and more borrowing while continuing to draw on wartime savings. Non-military spending was already cut by 35 percent this year and it will also need to be decreased next year by at least 13 percent to finance the war.

These measures will hurt the civilian sector of the Russian economy further as there will be even less money to invest in public infrastructure. The Russian population will also need to bear the burden of the increased military spending as Russia cannot borrow internationally, which means that the Russians themselves need to pay higher taxes and buy government bonds. However, the government repeatedly failed to sell short-term bonds in auctions, indicating that the population will need to finance Russia's growing budget deficit.

Because of the ever-increasing debt burden, borrowing becomes more expensive and consumes money available for other spending. To solve this, Russia might need to print billions of rubles to finance it, which will stoke inflation even further or force it to devalue currency, which will make imports for ordinary Russians even more expensive. The decrease in state pensions, maternity and family benefits will also make the life of ordinary Russians even more difficult financially.

11 percent of Russia's small businesses are already unable to pay their debts, which will lead to shop closures, leaving business owners without income. Despite increasing its military budget from year to year, Russian progress on the front line slowed down in 2026. The Kremlin is committing more money to replace losses, pay troops and sustain weapons production as it seeks further advances.

With this increased spending, Russia seeks to break the deadlock on the front line and advance deeper into Ukraine. Additionally, Russia plans to produce thousands of drones and hundreds of missiles monthly, which would allow it to destroy civilian infrastructure in every major Ukrainian city, to force the population to leave their homes and potentially force the Ukrainian government to capitulate to Russian demands. However, higher prices, equipment shortages and the need to replace losses can absorb much of the increase before it produces additional fighting power.

Overall, Russia's record military budget shows that the Kremlin is willing to sacrifice more civilian spending to sustain the war. That commitment gives Moscow resources to keep fighting, but it does not guarantee the breakthrough Putin wants. Ukraine and its partners therefore cannot rely on economic pressure alone to stop Russian attacks. If Ukrainian defenses continue denying decisive gains, Moscow will face an increasingly costly choice between funding a prolonged war and meeting the needs of its own population.

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