In a major shift of state priorities‚ Russias 2025 budget puts an un-precedented 6.3% of GDP towards military needs (which is about one-third of all spending)‚ making it the biggest defense-focused budget since cold-war times
The economy shows mixed signals with interest rates hitting a 20-yr high and the rouble at its lowest point versus dollar in about a year. Western restrictions blocked most international funding which leaves Moscow with limited money-raising options
The government already started working on getting more money through taxes - new reforms should bring in extra 1.7% of GDP by early-25. However experts like Alexei Klimyuk from Alfa Wealth think its not enough: “Many new tax law changes will come in 2025“
Oil price changes create more budget problems. Natalia Orlova‚ chief economist at Alfa-Bank notes that with prices going down from $70 to $65.5 per barrel between 24-27; the country needs to find new money sources
To support military spending the government makes cuts in other areas:
- Small business support down 11.6%
- Education program funding cut by 11%
- Regional social benefits reduced by 31%
- Social services update program decreased by 35%
Vladimir Kolychev (deputy finance minister) points out that while military costs went up by 3-3.5% of GDP other spending actually went down by 1-1.5% showing clear priority shifts
The budget has never been so fiscally focused on extracting revenues from every possible source as it has been recently