Russian officials warn about the budget deficit due to defense spending (Bloomberg)

Officials from the Russian Ministry of Finance and the central bank have informed the Kremlin that the current level of defense spending risks generating a significant budget deficit, according to sources cited by Bloomberg. Concerned about the state of the economy and the budget, they have proposed cuts to defense spending, highlighting the difficulties in restoring public finances without identifying new sources of efficiency.

In contrast, the Ministry of Defense, supported by part of the Kremlin, is calling for the military budget to be maintained, arguing that cuts would affect the economy, considering the dependence of companies on contracts with the military. Putin has asked the Ministry of Finance to find cuts in other areas before targeting defense. Military spending may require an increase to cover an estimated deficit of three trillion rubles.

Russia is approaching recession, with a revised GDP growth forecast of 0.4% for 2026. The budget deficit has increased significantly, despite oil revenues, and reserves are greatly diminished. Russia is considering a tax on exceptional profits to cover the deficit.