Russia's War Economy: Defense and Security Now Nearly Half of Public Spending

Russia will increase military spending by 32% in 2027, reaching 17.1 trillion rubles, with defense, security, and espionage consuming nearly half of the total state budget, an unprecedented level since the Soviet era. The draft budget, to be presented to the Duma this week, shows defense alone will take 35% of all spending, while debt interest payments will exceed education funding. Moscow's deficit is projected to reach 7.3 trillion rubles, or 3.2% of GDP, partly due to Ukrainian strikes on refineries reducing hydrocarbon revenues. The Kremlin has raised the military personnel cap to 2.4 million, and similar spending levels are planned through 2029. Interest rates above 14% on new debt issues are widening the fiscal hole, while the government has cut eight of eleven key health spending categories.