The deficit is twice the official forecast and is set to reach 2% of GDP
The state budget deficit of the russian federation in 2027 is expected to reach nearly 5 trillion rubles. This figure of 2% of GDP is double the previously published estimates. This was reported by UkrRudProm citing The Moscow Times, according to the portal PromPolitInform.
According to the Russian Ministry of Economy, the budget shortfall for the next year will reach 4.8 trillion rubles, equivalent to approximately 57.01 billion dollars. The previous three-year budget plan aimed to cap the deficit at 1.2% of GDP; however, current figures represent the highest level seen throughout the full-scale invasion of Ukraine.
According to Putin, the 2% of GDP deficit calculation is based on a projected oil price of around 50 dollars per barrel. Meanwhile, analytical institutions warn that actual figures may turn out to be significantly higher due to the constant need for increased military expenditure.
Economic pressure factors
Key challenges within the Russian financial system include a sharp rise in debt servicing costs driven by high interest rates. Furthermore, there is a decline in base oil and gas revenues, slowing economic growth, and stagnant household income, which limits tax collection potential.
The Russian state budget is also under pressure due to the requirement for regular transfers to social and pension funds. In the medium and long term, the Russian Ministry of Finance no longer anticipates a return to a budget surplus, expecting chronic deficits until at least 2042.
Debt obligations and reserves
The financial situation is exacerbated by the fact that federal budget spending over the next decade will require allocating at least 15% of GDP to interest payments on state debt. A further sign of negative dynamics is that during the first eight months of this year, the deficit already exceeded 5.8 trillion rubles, with analysts forecasting it to rise to 7.5 trillion rubles by year-end.
To cover budget needs, the Central Bank of Russia has engaged in large-scale sales of gold from its reserves, becoming the world’s largest seller of the precious metal. It was also previously reported that Russia’s GDP growth for last year was significantly lower than expected, further limiting the country’s fiscal space.
Illustrative photo: Ministry of Finance of India / GODL-India
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