According to UK intelligence, the draft budget includes a 16% reduction in social spending and prioritizes military funding despite 9% inflation, economic challenges, and excess demand.
According to the UK Defense Ministry Intelligence Update published on 9th October, the proposed budget for Russia in 2025 includes a 25% increase of defense spending and a reduction of 16% in social spending. This reflects the government‘s priority in military financing.
This budget decision was made against a backdrop of rising inflation that reached 9% in august 2024 and the ongoing economic challenges resulting from a demand that exceeds supply.
The Ministry wrote:
* On 30 September, 2024, the Russian Government submitted to the State Duma draft budget proposals for the year 2025. The 2025 budget anticipates that expenditures will grow by 5%, not adjusted for inflation, to 41.5 trillion Rubles ($447bn).
* The proposed budget anticipates a 25% increase in defense spending in 2025 compared to the budget announced in 2024. The 2025 budget includes 32% defence spending, up from 14.5% pre-war in 2021. The new budget shows that Russia continues to prioritise financing the war above other domestic priorities. Social spending, for example, is expected to drop by 16% by 2025.
* The Russian economy continues to be oversupplied, and the budget expansion for 2025 will likely make this situation worse. This will almost certainly increase inflationary pressures, which remain a major issue due to the fact that the inflation rate was approximately 9% in august 2024.
According to ISW despite Russian officials including Prime Minister Mikhail Mishustin highlighting the importance of fulfilling social duties, the 2025 Defense Budget is set to increase to $140 billion and consume 40% of the federal budget.
ISW reported earlier that Russia intends to allocate almost 1 billion dollars for military contract payments between 2025 and 2027, indicating continued reliance on Crypto-mobilization to provide war manpower in Ukraine.
* ISW: Russia targets victory over Ukraine in 2026 despite growing economic challenges
* ISW: Russian officials stress social spending, but increase defense budget to $140 billion by 2025
* ISW: Kremlin plans on funding crypto-mobilization through 2027
Expert: * Russia’s economy is nearing a tipping point. It doesn’t have unlimited resources
* Russia produces three times more artillery for Ukraine than the US and EU
* UK intelligence: Russia will increase military output in 2023 and have a material advantage over Ukraine in 2024
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