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Russia’s mounting war costs are pushing the country deeper into debt, with military spending expected to exceed budget plans by up to 5 trillion rubles ($69 billion) this year, Bloomberg reported.
According to the outlet, international sanctions have largely cut off Russia from foreign financing, forcing the Kremlin to rely increasingly on expensive domestic borrowing to fund its war against Ukraine, UATV English reports.
Defense spending in 2026 could exceed initial projections by 4-5 trillion rubles, nearly 40% above the amount originally allocated in the federal budget.
Under the budget law, Moscow planned to raise just over 4 trillion rubles on the domestic market to cover state expenditures, while setting a debt ceiling of 37.4 trillion rubles. However, the budget deficit reached 6 trillion rubles, or 2.6% of GDP, during the first five months of the year — already exceeding the full-year target by around 60%.
According to Bloomberg, Russia has effectively reached its debt ceiling and may need to borrow an additional 2-3 trillion rubles this year, despite efforts by the Finance Ministry to reduce the deficit through reserve spending and cuts elsewhere.
The cost of servicing Russia’s debt has doubled since the full-scale invasion of Ukraine in February 2022, as the Central Bank raised interest rates to record levels to cool the overheating economy.
Interest payments accounted for roughly 4.5% of federal spending in 2021, ranking only eighth among budget categories. This year, Russia is expected to spend nearly 4 trillion rubles on debt servicing, or about 9% of total federal expenditures, making it the fifth-largest spending item after defense, national security, social policy, and economic programs.
Bloomberg estimates that over the next decade Russia could spend the equivalent of at least 15% of GDP on debt interest payments alone — roughly matching the size of the country’s entire current public debt.
Oil and gas revenues, which account for around one-fifth of Russia’s budget income, rose 32.4% year-on-year in May to 678.9 billion rubles ($9.3 billion), supported by higher global oil prices amid tensions in the Middle East.
However, revenues declined by more than 20% compared to April, when cyclical corporate tax payments boosted state income. Overall energy revenues for the first five months of the year totaled nearly 3 trillion rubles, around 30% lower than in the same period of 2025.
Russian Economic Development Minister Maxim Reshetnikov warned earlier this year that businesses should not expect increased state support, acknowledging that government finances are under pressure.
The Institute of Economic Forecasting of the Russian Academy of Sciences estimated that Russia’s economy contracted by 1.5% year-on-year in the first quarter of 2026, the worst performance since sweeping Western sanctions were imposed. The institute revised its full-year forecast to a 0.6% decline.
Meanwhile, regional governments ended 2025 with a combined budget deficit of 1.54 trillion rubles ($20.95 billion), the largest shortfall in two decades of available statistics.
Analysts from the Russian Academy of Sciences have warned that many of the country’s long-term risks are materializing, including labor shortages driven by demographic decline, growing technological dependence on China, weakening hydrocarbon revenues, rising defense burdens, and increasing sanctions pressure.
