• Russia’s budget deficit widening as energy revenues fall
• Moscow spending heavily on defence and national security
• Russia may struggle to keep funding war without budget tweaks
• Putin says Russia’s economy is strong, budget is stable

Moscow is preparing to raise taxes and cut spending as it tries to maintain high defence expenditure with Russia’s economy creaking under the weight of financing the more than three-year war in Ukraine, officials and economists say.

President Vladimir Putin has rejected suggestions that the war is killing Russia’s economy, but the budget deficit is widening as spending mounts, while revenue from oil and gas is declining under pressure from Western sanctions.

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“Given the more pessimistic estimates of economic indicators and the decline in oil and gas revenues, we will need to urgently start fiscal consolidation,” Anatoly Artamonov, head of the [Russian] upper house of parliament’s budget committee, said.

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CentroCreditBank economist Yevgeny Suvorov said the deficit could stretch to 8 trillion roubles as Moscow’s spending would require an almost 20% year-on-year real-terms cut in August-December to meet the 2025 spending target of 42.3 trillion roubles.

“The central bank is in no hurry to lower the key rate, including because the budget deficit may be higher than planned,” said a senior source familiar with finance ministry plans.

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