Russia to increase 2027 military spending by 27% to $202 billion

Draft budget documents reveal Russia plans to increase its 2027 military spending by 27% to 17.1 trillion rubles ($202.58 billion), marking the highest level since the 2022 invasion of Ukraine. This surge, alongside a drop in projected 2026 oil and gas revenues to 7.6 trillion rubles, is widening the 2026 budget deficit to 3.2% of GDP. To cover the shortfall, Moscow is drawing from its National Wealth Fund, increasing borrowing, and introducing new tax hikes, including a windfall tax on metals and mining companies.

Russia's projected defense spending

• ▪Russia's total defense spending will amount to 50 trillion rubles over the three-year period from 2027, according to government budget documents
• ▪Russia plans to spend 17.1 trillion rubles ($202.58 billion) on defense in 2027, representing a 27% increase from the 13.5 trillion rubles originally budgeted for 2027
• ▪Russia's planned 2027 defense spending of 17.1 trillion rubles is the highest figure since the start of the war in Ukraine in 2022

New tax measures to fund deficit

• ▪The Russian government announced plans in September 2026 for new tax hikes in 2027 to finance its growing budget deficit
• ▪The Russian government plans to implement a new windfall tax on metals and mining companies expected to raise approximately 200 billion rubles annually

Projections for the 2026 budget

• ▪The Russian government plans to spend 459 billion rubles, representing about 11% of the liquid portion of its National Wealth Fund, to reduce the 2026 budget deficit
• ▪The Russian government raised its estimate for the 2026 budget deficit to 3.2% of gross domestic product, up from its previous estimate of 1.6% of GDP
• ▪The Russian government cut its 2026 oil and gas revenue estimate to 7.6 trillion rubles, down from the previous estimate of 8.9 trillion rubles

Debatable claims

• ▪Russia's windfall tax on mining companies is justified to fund the state budget
• ▪Russia's 2027 military spending increase poses an unacceptable risk to its economic stability