The pressures of the war in Ukraine are starting to bite for Russian President Vladimir Putin and his policymakers in the Kremlin, with Moscow planning tax hikes and spending cuts to deal with its growing budget deficit.
The draft budget for 2026 is expected to be submitted to parliament on September 29. Only minor changes are likely from that point, with Putin having agreed to the main details by then.
On Wednesday (September 25), the government announced plans to raise value added tax to 22% from 20% in a bid to curb the deficit, reneging on a pledge Putin previously made not to raise taxes before 2030.
There is also growing expectation that nondefense spending, including some social spending, will be cut to deal with the mounting pressures caused, largely, by plunging oil revenues.
Russia's budget deficit has grown to around 4.2 trillion rubles ($50 billion, €42.7 billion). That's around 1.9% of the country's gross domestic product (GDP) — almost four times the original target of 0.5% for 2025. The finance ministry expects the deficit to reach 5.7 trillion rubles by the end of the year.
