Russia's federal budget spending and fiscal deficit are projected to surpass official government targets by more than 1 trillion roubles ($12.85 billion) in 2026.

According to data published on the government's budget portal, the figures, indicate that federal spending could reach 45.11 trillion roubles next year, exceeding the 44.07 trillion roubles approved under the current budget law.

Although the budget portal did not specify the reason for the higher spending projections, the increase comes as Russia continues to allocate significant resources to its military campaign in Ukraine, driving defence expenditures higher.

Government projections show federal revenue remaining unchanged at 40.28 trillion roubles, resulting in an estimated budget deficit of 4.83 trillion roubles in 2026.

The revised figure is substantially higher than the 3.79 trillion roubles deficit outlined in the current budget, which is equivalent to 1.6% of gross domestic product (GDP).

The projected increase in the budget gap comes as the Bank of Russia prepares for its next monetary policy meeting, where policymakers are expected to decide whether to continue lowering the country's benchmark interest rate or keep borrowing costs unchanged.

The central bank has repeatedly warned that a wider fiscal deficit poses a significant inflationary risk, complicating efforts to stabilize prices.

Official Finance Ministry data show that Russia recorded a budget deficit of 5.73 trillion roubles, or 2.5% of GDP, during the first half of the year.

That figure represents an increase of 1.7 times compared with the same period a year earlier, underscoring the mounting fiscal pressures facing the government.

Finance Minister Anton Siluanov has acknowledged that the budget deficit is likely to increase beyond the official target, although he has maintained that the higher shortfall will not require a significant expansion in domestic borrowing.

The Finance Ministry has also pushed back its goal of achieving a zero primary budget deficit under Russia's fiscal rule until 2029, reflecting expectations that public finances will remain under strain for several more years.

Budget projections indicate that fiscal deficits are expected to remain above previously planned levels throughout the coming two years.

Russia's fiscal position has deteriorated markedly since the escalation of the conflict in Ukraine. In 2025, the country's budget deficit reached 5.7 trillion roubles, or 2.6% of GDP, nearly five times higher than the government's original target and the largest budget shortfall recorded since the COVID-19 pandemic in 2020.

Economists say the trajectory of government spending and borrowing will remain a key factor influencing inflation, monetary policy, and Russia's broader economic outlook in the years ahead. (ILKHA)