The new Russian budget, 2024-2026, will throw a lifeline to the Russian defense industry as well as the war in Ukraine. Russian pavilion at a previous International Defence Exhibition & Conference (IDEX) held in Abu Dhabi, UAE.
“Everything for the front, everything for victory,” – Head of the Ministry of Finance, Anton Siluanov
On 27 November 2023, Russian President Putin signed the federal budget for 2024-2026. The budget dedicates a dramatic 30 percent of total expenditures to the Armed Forces and military industrial complex. According to the excerpted article from the Russian and English-language independent online newspaper The Moscow Times, the increase in funds dedicated to the military establishment is “2.3 times more than [was appropriated] in 2022.” For comparison, funds dedicated to the military represented only 17 percent of the federal budget in 2022 and 19 percent in 2023. That percentage will increase to 29.5 percent in 2024. The Russian government will also spend “another 3.338 trillion rubles under the heading ‘national security,’ which includes the budgets of the Ministry of Internal Affairs, the National Guard, the special services and the FSIN[i] system. Thus, in total, nearly “40 percent of the [federal] budget will be spent on law enforcement agencies.” To make this happen, Russia will have to pull funds from other parts of its economy including healthcare (which will be cut by 10 percent), aid to small businesses (which will lose 20 percent), and the “development of Infrastructure for Scientific Research,” (which will be reduced by 25 percent). Notably, “funding for state propaganda,” a line item of Russia’s federal budget and a critical part of its war in Ukraine, would remain the same as in the last budget. The signing into law of the new budget comes in conjunction with multiple other significant financial changes, including the Russian reintroduction of capital controls[ii] to stabilize the ruble against the dollar and other global currencies.[iii] Taken together, the signaling demonstrates Russia’s determination to see the war to a positive outcome—at a time when funding for Ukraine in the U.S. and among other Western powers is under scrutiny.
Sources:
“Путин утвердил рост расходов на армию до рекорда со времен СССР (Putin approved an increase in spending on the army to a record since Soviet times),” The Moscow Times (a Russian-English language online newspaper), 27 November 2023. https://www.moscowtimes.ru/2023/11/27/putin-razreshil-rosnefti-idesyatkam-goskompanii-zasekretit-informatsiyu-osebe-a114361
Russian President Vladimir Putin on Monday, November 27, signed the law on the federal budget for 2024-26. According to the document, which was adopted by the State Duma on November 15 and approved by the Federation Council a week later, next year, for the first time since Soviet times, the Russian authorities intend to allocate almost a third of all expenditures on maintaining the army and the military-industrial complex.
For the year, under the item “national defense” the budget will spend 10.775 trillion rubles – 70% more than in 2023 (6.8 trillion), 2.3 times more than in 2022 (4.7 trillion), and three times higher than the pre-war 2021 indicators (3.5 trillion).
The share of military expenditures in the budget, the total size of which will be 36.66 trillion rubles, will reach 29.5%. For comparison: the current year’s budget initially included only 19% of defense spending (5 trillion rubles out of 26.1 trillion); in the first year of the war with Ukraine, this share was 17% (4.7 trillion rubles out of 27.8 trillion).
The USSR spent a third of its budget on defense in its final years. Thus, in the 1990 budget, 71 billion rubles out of 241.3 billion, or 29.4%, were allocated for “military purposes” (data published in the archive of ex-Prime Minister of the Russian Federation Yegor Gaidar).
According to the budget law, the government will spend another 3.338 trillion rubles under the heading “national security”, which includes the budgets of the Ministry of Internal Affairs, the National Guard, the special services and the FSIN system. Compared to the current year, these expenses will increase by 163 billion rubles. Thus, in total, almost 40% of the budget will be spent on law enforcement agencies.
To make ends meet, the government will cut costs to support the national economy: they will decrease from 4.125 to 3.889 trillion rubles. Funding for education and medicine – 1.6 trillion rubles each – will be “frozen”, and in real terms – taking into account inflation – will be reduced.
Expenses under the national Healthcare project are planned to be cut by 10%, from 321.3 to 289.9 billion rubles, and the sequestration will affect almost all of its subprograms. Expenses under the federal project “Modernization of Primary Health Care” will be reduced by 14%, to 81.64 billion rubles. The federal project “Fighting Cancer” will lose weight by 8%, to 147.4 billion rubles. Expenditures on the development of children’s healthcare will be reduced by almost half – from 19.5 to 10.2 billion rubles; for the development of primary medical care – by 20%, to 7.677 billion rubles.
The national project to support small businesses will lose almost 20% of funding (67.7 billion rubles); Expenses for the federal project “Development of Infrastructure for Scientific Research” are reduced by 25% – to 47 billion rubles. Allocations for the state program “Development of the Aviation Industry” will be cut by 28% – 37.3 billion rubles. In addition, the government plans to save on supporting the regions: transfers to them from the federal budget will be less by 4% – 1.474 trillion rubles.
Funding for state propaganda will remain at record levels: state media will receive 121.3 billion rubles from the budget compared to 122 billion this year. Expenditures under the item “culture and cinematography,” which includes budgets for the creation of war propaganda films, will increase by 11%, to 234 billion rubles.“Everything for the front, everything for victory,” said the head of the Ministry of Finance Anton Siluanov in September, commenting on the document. He urged people not to worry that there would not be enough money in the treasury. “But there will be enough for what is planned. A normal, healthy budget,” the minister emphasized.
Notes:
[i] FNIS is the Federal Penitentiary Service (ФСИН России), the federal authority for the detention of suspected and convicted persons, and the security and maintenance of prisons in Russia.
[ii] Capital Controls are measures taken by a government to limit the flow of foreign capital in and out of the domestic economy. Since the war in Ukraine began in February 2022, Russia has sought, among other regulatory actions, to stabilize the ruble by requiring that a large portion of all foreign currency profits made by Russian exporters be converted into rubles. For a recent discussion on some of the capital controls recently imposed by Russia, see: “Russia has tightened capital controls to help prop up ruble, report says,” The Guardian, 31 October 2023. https://www.theguardian.com/world/2023/oct/31/russia-capital-controls-rouble-vladimir-putin
[iii] For more on other Russian moves to reduce the dominance and dependency of the U.S dollar, see: Dodge Billingsley, “Russia Enlists Partners To Attack U.S. Dollar To Fund War In Ukraine,” OE Watch, 09-2023. https://fmso.tradoc.army.mil/2023/russia-enlists-partners-to-attack-u-s-dollar-to-fund-war-in-ukraine/
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