Russia plans record 27% defense spending hike for 2027, financed by new taxes and borrowing
Russia's draft federal budget for 2027 allocates about 17.1 trillion rubles (~$202.4 billion) to defense, roughly 27% more than previously planned and the largest war budget since the start of the full-scale invasion of Ukraine. The government is financing the increase through higher taxes on citizens and resource companies, expanded borrowing, and drawdowns from the National Wealth Fund, while social, education and healthcare spending are set to be cut.
Key points
- 2027 defense spending planned at 17.1 trillion rubles (~$202.4 billion), up about 27% from the previous $159.8 billion plan — the highest since the start of the full-scale war in 2022.
- Total Russian defense outlays over the next three years are planned at about 50 trillion rubles (~$591.8 billion).
- The 2026 federal budget deficit forecast has been doubled to 3.2% of GDP, up from an earlier 1.6% estimate.
- Total 2026 budget expenditures are planned at 48.6 trillion rubles (~$575.2 billion), or 20.9% of GDP.
- Net borrowing in 2026 is set to rise 26% to ~5 trillion rubles (~$59.2 billion); 2027 borrowing is planned to grow another 43% to ~7.7 trillion rubles (~$91.1 billion).
- About 459 billion rubles (~$5.43 billion), roughly 11% of the liquid part of the National Wealth Fund, will be drawn down in 2026.
- State debt is projected to reach 21.7% of GDP in 2027 (up from 19.9% in 2026), crossing the 20% threshold Russian authorities consider safe.
- New 2027 taxes: income from dividends, deposits and real estate sales taxed at 22% (up from 15%), affecting ~4 million people; 30% windfall tax on mining and metallurgy; 35% on dividends to foreign shareholders; 15% on unit investment funds.
- Oil and gas revenue forecast for 2026 cut from ~8.9 trillion rubles (~$105.3 billion) to ~7.6 trillion rubles (~$90 billion).
- 2027 civilian cuts vs. original plan: social policy −7%, education −6%, healthcare −6.8%, national economy −7.4%; debt servicing to grow 21.6% to 9.4% of expenditures.
- The draft budget must be submitted to parliament by October 1; parts of military spending are reported to be booked outside the dedicated defense line, and the actual 2026 defense figure (~$143.2 billion planned) is classified.
Why it matters
The 2027 plan would set Russia's defense budget at a new post-invasion record, signaling that Moscow intends to sustain and expand military outlays well beyond the current war. The financing mix — new taxes on households and resource companies, a doubling of the 2026 deficit forecast to 3.2% of GDP, accelerated borrowing, and a drawdown of about 11% of the liquid National Wealth Fund — points to mounting fiscal strain, especially as oil and gas revenues are revised sharply downward. The fact that state debt is projected to cross the 20%-of-GDP line that Russian authorities themselves treat as a safety threshold, while social, education and healthcare spending are being cut, shows a budget reordered around the war at the cost of civilian outlays.
What happened
Russia's draft 2027 federal budget allocates about 17.1 trillion rubles (~$202.4 billion) to defense, roughly 27% more than the previous 13.5-trillion-ruble plan (~$159.8 billion) and the largest defense figure since the start of the full-scale war in Ukraine. Total defense spending over 2025–2027 is planned at about 50 trillion rubles (~$591.8 billion). Some of that money is reported to be booked outside the dedicated defense line, and the actual 2026 figure, originally planned at about 12.1 trillion rubles (~$143.2 billion), is classified and will not be published.
The 2026 deficit forecast has been raised to 3.2% of GDP from a previously expected 1.6%, with total expenditures planned at 48.6 trillion rubles (~$575.2 billion), or 20.9% of GDP. Net borrowing for 2026 is set to grow 26% to about 5 trillion rubles (~$59.2 billion), and the government plans to spend roughly 459 billion rubles (~$5.43 billion), or about 11% of the liquid part of the National Wealth Fund, to cover the gap. Oil and gas revenues for 2026 have been cut from about 8.9 trillion rubles (~$105.3 billion) to 7.6 trillion rubles (~$90 billion).
To fund 2027, Moscow plans new taxes: the rate on income from dividends, deposits and real estate sales will rise from 15% to 22%, affecting about 4 million people; mining and metallurgy companies will pay a 30% windfall tax; dividends to foreign owners of Russian shares will be taxed at 35%; unit investment funds at 15%. Total borrowing in 2027 is planned to rise another 43% to about 7.7 trillion rubles (~$91.1 billion), pushing state debt to 21.7% of GDP — above the 20% threshold Russian authorities consider safe. The government must submit the draft budget to parliament by October 1.
Compared with the original 2027 plan, social policy funding is to be cut 7%, education 6%, healthcare 6.8% and 'national economy' expenditures 7.4%, while debt servicing costs grow 21.6% to 9.4% of expenditures and are projected to reach 10.6% by 2029.
Background
The Russian government is required to submit the draft federal budget to parliament by October 1, putting these figures into the formal budget process. Some Russian military spending is reported to be booked under budget line items other than the dedicated defense section, so the headline defense figure may understate total war-related outlays. For 2026, the planned defense figure of about 12.1 trillion rubles (~$143 billion) is classified, and the actual amount will not be published. Finance Minister Anton Siluanov reportedly warned Prime Minister Mikhail Mishustin earlier in the year that the state may not be able to make all current payments on time, after the Unified Treasury Account briefly went into the red in April.