On November 28, 2025, Russia signed its federal budget for 2026-2028, featuring record-high defense spending—about 12.9 trillion rubles ($166.8 billion) in 2026, nearly 30% of all federal expenditures.
National security and law enforcement are separately budgeted; together with defense, they account for 38% of total spending, a 60% increase since 2021.
Amid falling oil and gas revenues and Western sanctions, Russia is boosting tax pressure. From January 1, 2026, VAT rises from 20% to 22%, making most goods more expensive. A technological tax on electronics and new stricter rules for small businesses are also being introduced.
Social and economic spending is declining: only 25.1% of the 2026 budget goes to social policies—the lowest since 2011. Support for the economy drops to 10.9%. Debt servicing is rising as the Central Bank maintains a high interest rate.
The measures mark a systemic economic overhaul for prolonged war, causing non-military sectors to degrade and living standards to fall. Experts note these are unproductive expenditures that fail to create value.
Ukraine must prepare for a long-term contest and invest in strengthening its own economic and technological capabilities.
