The Russian government is planning to raise taxes on consumers in an effort to secure additional revenue to finance the war in Ukraine, at a time when the country’s public finances are facing increasing pressure.
According to official Russian data, the federal budget deficit exceeded €60 billion in the first half of the year, while by the end of July it had reached 2.8 percent of gross domestic product (GDP), nearly twice the planned level.
At the same time, Russia’s financial reserves have fallen to around 1.6 percent of GDP, prompting the government to increase borrowing from domestic banks.
The Russian economy is also facing a significant slowdown in growth. After expanding by more than 4 percent in 2023–2024, the Russian government expects the economy to grow by only 0.6 percent this year.
The widening deficit is largely linked to increased government spending, including funding for the war and public procurement, while revenues have been affected by international sanctions.
Ukraine’s long-range strikes against refineries and oil storage facilities inside Russian territory have also added pressure on the economy, generating additional costs for Moscow’s defense and response efforts.
A draft proposed by the Kremlin states that “the strategic priority of the budget is financial support for defense and national security,” including assistance for participants in the war and their families.
Although low unemployment and higher wages in the public sector have helped ease social pressure, experts warn that structural problems and continuously rising government spending could create greater difficulties for the Russian economy in the long term.
