⚠️ Caution the watchword as Russia unveils budget

Hello and welcome to a special edition of our newsletter that looks at Russia’s 2026 budget—the key to understanding the government’s financial priorities. How is Russia balancing the needs of the war in Ukraine with ensuring macroeconomic stability?

As in other years since the full-scale invasion of Ukraine, this year’s budget, which was submitted to parliament on Monday, allocates huge sums to the military. But it also revealed the Finance Ministry has made a big effort to curb spending. Indeed, for the first time since 2022, spending next year will be almost unchanged compared to what was planned in 2024 (see table). It’s true that, on paper at least, year-on-year spending in 2026 is supposed to increase by 4 percent. However, given the government’s inflation target is 4 percent (and inflation is currently about 8 percent), real-term spending next year will flatline, or fall. This is a significant shift after years of rising spending driven by the need to finance the war.