Russia to hike defence spending by a quarter in 2025

Russia is hiking state spending on national defence by a quarter in 2025 to 6.3 percent of gross domestic product (GDP), the highest level since the Cold War, according to draft budget documents.

Defence spending will rise to 13.5 trillion roubles ($145bn) in 2025, the fourth year of what Russia calls “a special military operation” in Ukraine, up 25 percent from the 2024 level, the documents published on Monday showed.

Defence spending will account for 32 percent of total 2025 budget expenditure of 41.5 trillion roubles ($446bn).

The draft budget was officially submitted on Monday to the State Duma, the lower house of parliament, for review.

In last year’s draft, the government planned to reduce defence spending by 21 percent in 2025. The reversal shows the scale of state planners’ continued focus on the military.

In 2022, the year the Ukraine war started, Russia spent 5.5 trillion roubles ($59bn) on defence.

“Resources will be allocated and have already been allocated for equipping the armed forces with the necessary weapons and military equipment, paying military salaries, and supporting defence industry enterprises,” Russia’s Ministry of Finance said in a statement.

About 10 percent of total defence spending will go to military personnel payments, which have also hit a post-Soviet high, with the minimum annual wage in the first year of service at the front line reaching 3.25 million roubles ($34,945).

State spending on national security, a separate item from national defence, which also includes financing of the military and security agencies, will amount to 3.5 trillion roubles ($38bn) in 2025.

The total state spending on defence and security will amount to 17 trillion roubles ($183bn), or almost 41 percent of total expenditure. It will also stand at eight percent of the country’s GDP.

Highest in post-Soviet era

The share of GDP is comparable with the estimated military spending share in the late Soviet years, when the Soviet Union was fighting a war in Afghanistan, while maintaining a vastly larger nuclear arsenal to counter its Cold War adversaries.

Defence spending will exceed twice the amount allocated for social needs, which include pensions, social compensations and subsidies, projected at 6.5 trillion roubles ($70bn) in 2025.

The government will allocate 1.58 trillion roubles ($17bn) or 0.7 percent of GDP for education and 1.86 trillion roubles ($20bn) or 0.87 percent of GDP for healthcare in 2025.

The government has hiked its projection for the 2024 budget deficit to 1.7 percent of GDP, up from the previous projection of 1.1 percent and the initial projection of 0.9 percent. The 2025 budget deficit is seen at 0.5 percent of GDP.

Russian oil and gas revenues for the state budget are expected to decline in 2025-2027 due to lower commodity prices and tax changes, as the country’s largest gas producer, Gazprom, is set to see its tax burden fall.

According to Finance Minister Anton Siluanov, the share of oil and gas in state budget revenues will stand at 27 percent of total budget revenues.

“This is lower than in all previous years, and this is good – we are moving away from oil and gas dependency in our budget revenues,” Siluanov told state television.

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