Record defence spending, pension cuts: Russia approves budget for 2025–2027

The State Duma of Russia has approved the federal budget for 2025-2027 during a plenary session on 21 November in its third and final reading. Source: The Moscow Times Details: The document revealed that the Russian government plans to further increase military funding next year while, for the first time in years, nominal spending on social support for citizens will be reduced.

The social policy category, which includes pensions and welfare payments, will decrease from RUB 7.73 trillion (US£76.3 billion) this year to RUB 6.49 trillion (US£64 billion) in 2025.

In 2026, social spending will increase to RUB 7.19 trillion (US£70.9 billion) and then to 7.2 trillion (US£71 billion) in 2027. The funds saved will be redirected to the military budget, which will account for 32.5% of federal spending - a record share since Soviet times. For comparison, defence spending was 17% of the budget in the first year of the war against Ukraine, 19% in 2023, and 29.5% this year. 

In 2025, Russia plans to allocate a record RUB 13.5 trillion (US£133.2 billion) to defence, followed by 12.8 trillion (US£126.3 billion) in 2026 and 13.1 trillion (US£129.3 billion) in 2027.

Compared to the current year, spending in 2025 will increase by 25%, double that of 2023, and nearly quadruple the spending of the pre-war year 2021. The military budget will amount to 6.2% of the national GDP, with nearly one-third of the funds allocated under classified articles. An additional RUB 3.46 trillion (US£34.1 billion) will be spent on national security, which includes budgets for police, the National Guard, the Investigative Committee, intelligence agencies and other security structures.

Together, the military and security agencies will consume 40% of the federal budget - RUB 16.9 trillion (US£166.8 billion). Education spending will see little change, at RUB 1.57 trillion (US£15.4 billion) next year compared to 1.54 trillion (US£15.2 billion) this year. Funding for state propaganda media, however, will rise to a record RUB 137.2 billion (US£1.3 trillion) - a 13% increase from 2024.

Background:

• The Central Bank of Russia recently raised the key interest rate by 2 percentage points, reaching a record 21% annually.
• Food prices in Russia are expected to increase by another 8-20% next year due to overall inflation, rising transportation costs and the Central Bank's high key interest rate.

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