Image Credentials: Image Title: Russian Airborne Brigade Officers Face Fraud and Bribery Charges in Staged Injury Scandal Source: (Gemini) Date: August 2025 Attribution: Created by AI-generated imagery (Gemini), it does not depict a real-world scene.
By Staff Writer | Open Chronicle with Agencies
Moscow, August 22, 2025 — Russia is preparing to raise taxes and slash non-military spending to sustain record levels of defense expenditure, according to a report by Reuters citing a government source familiar with upcoming budget plans.
The revised 2025 federal budget, expected to be presented in September, will earmark 17 trillion rubles ($211 billion) for defense and security, equal to 8 percent of GDP and 41 percent of total government spending. It is the largest share allocated to the military in Russia’s post-Soviet history. The source added that actual defense outlays were “slightly higher” than official figures.
Cuts to defense spending, they said, would only be considered in 2027 and only if the war in Ukraine ends. “Otherwise, we simply won’t be able to make ends meet, even with a reduction in defense spending,” the source told Reuters. “Oil and gas revenues are falling, and the economy cannot fully compensate for this.”
Deficit Surges as Revenues Lag
Russia’s Finance Ministry revealed earlier this month that the state budget deficit had already exceeded its full-year target, reaching 4.88 trillion rubles ($61.1 billion) between January and July, or 2.2 percent of GDP. That figure is far above the 3.8 trillion rubles planned for all of 2025 under a revised budget signed by President Vladimir Putin this summer.
Officials cited weaker oil and gas revenues, down nearly 19 percent year-on-year, and “advance financing” of expenditures earlier in the year. Independent analysts, however, argue that the surge in defense spending is the primary cause.
Government figures show that outlays in July alone were up more than 24 percent compared to last year. Over the first seven months of 2025, total spending has risen more than 20 percent to 25.2 trillion rubles, while revenues have shown little growth.
Civilian Spending on the Chopping Block
Putin has dismissed concerns that military outlays are straining the economy, insisting instead that the buildup provides an opportunity to integrate defense and civilian industries. But behind the scenes, officials are weighing deep cuts to non-military programs.
Anatoly Artamonov, head of the Federation Council’s budget committee, has proposed annual reductions of 2 trillion rubles ($24.8 billion) in civilian spending until 2028. The plan would effectively shift resources away from public services, infrastructure, and social programs toward the war effort.
More Tax Hikes Looming
To bridge the gap, officials say higher taxes are inevitable. “Tax increases are unavoidable,” the government source told Reuters, noting that even with defense cuts, Russia will struggle to balance its accounts.
If enacted, the measures would represent the second significant tax hike in less than a year. Earlier in 2025, the Kremlin introduced a progressive tax system and raised corporate contributions to the budget, a move that already increased the burden on both businesses and high-income earners.
Despite assurances from the Kremlin, experts warn that the combination of record defense spending, declining energy revenues, and a widening deficit leaves Russia’s economy under mounting pressure. And with no end in sight to the war in Ukraine, Moscow’s fiscal balancing act is set to become even more precarious.
Staff Writers at Open Chronicle produce in-depth, field-informed reporting on defense, diplomacy, cultural transformation, and global affairs. Known for clarity, accuracy, and analytical depth, they connect breaking developments to broader historical and strategic contexts. In addition to frontline journalism, Staff Writers also contribute to the Open Chronicle Encyclopedia, crafting authoritative entries that preserve critical knowledge and enrich public understanding.