Russia plans record $202.6B defense spending in 2027 — Reuters

The planned allocation constitutes the highest single-year military expenditure since the launch of the full-scale invasion of Ukraine. Over the forthcoming three-year cycle, cumulative Russian defense outlays are projected to reach 50 trillion rubles ($592.33 billion).

For 2026, the Russian government earlier budgeted 12.1 trillion rubles ($143.35 billion) for defense, though exact expenditure figures remain classified state secrets, with additional defense appropriations embedded across undisclosed budget lines.

Compounding these costs, the Kremlin doubled its 2026 federal deficit forecast to 3.2% of GDP, up from the earlier projected 1.6%. Aggregate government outlays this year are slated to climb 13.2% to roughly $575.2 billion, accounting for 20.9% of Russia's total gross domestic product.

Tax Hikes and Sovereign Reserve Depletion

The Russian cabinet must formally submit the statutory draft budget to parliament by Oct. 1. Facing structural deficits, Moscow has begun enacting aggressive revenue extraction:

• Mining windfalls tax: A newly devised windfall tax targeting domestic metallurgical and mineral extraction corporations is projected to generate roughly $2.37 billion annually.

• National Wealth Fund drawdowns: The Kremlin will withdraw roughly $5.43 billion from its sovereign National Wealth Fund — a draw representing approximately 11% of the fund’s total liquid assets.

• Plunging hydrocarbons: Russia’s projected oil and gas revenues for 2026 were downgraded sharply from $105.3 billion to $90 billion.

• Spiraling state debt: Net domestic state borrowing targets for 2026 will rise 26% to roughly $59.2 billion. By 2027, total sovereign debt is projected to hit 21.7% of GDP — breaching the 20% ceiling the Kremlin officially classifies as the safe fiscal boundary — with total borrowing expanding an additional 43% to roughly $91.1 billion.

Contrasting strains inside Ukraine

$27 billion military shortfall: On Aug. 24, following a Coalition of the Willing summit, President Volodymyr Zelenskyy disclosed that Ukraine's military faced a immediate funding deficit of $27 billion. Defense Minister Yevhenii Khmara corroborated the figure five days later, stating options were being devised to cover the gap.

Austerity regime: On Sept. 1, Prime Minister Serhii Koretskyi announced rigid spending cuts across all non-defense budget lines. The next day, Parliamentary Budget Committee Head Roksolana Pidlasa reported that general revenues fell 33.1 billion UAH short between January and August.

Critical liquidity risks: On Sept. 4, Finance Minister Serhii Marchenko stated Ukraine faced its most strained budget crisis since 2022. By Sept. 14, Koretskyi warned that public finances bordered on a critical emergency, cautioning that legislative delays risked freezing $29.5 billion in foreign international assistance.

Prioritizing defense outlays: Following a Sept. 15 European Commission notice outlining required legislative benchmarks for pre-agreed funding, the Ukrainian cabinet enacted a decree on Sept. 28 formally prioritizing sovereign spending. Ukrainian Defense Ministry projects required domestic defense outlays to grow from $155 billion in 2026 to $175 billion in 2027, against a baseline $100 billion currently penciled into government draft figures.