Russia cuts spending after April cash crisis exposes war costs

Russia cuts spending after April cash crisis exposes war costs

Budgetary areas outside the war, salaries, social programs and debt service have faced 35% funding cuts since April.

Share

Add us on Google
By Editorial Team
Edited by Estefano Gomez

Russia imposed sharp spending restrictions after an April liquidity crisis exposed the rising cost of its war in Ukraine, according to people familiar with the matter.

The Treasury’s federal budget balances fell to a negative 5.5 trillion rubles ($65.3 billion) after Finance Minister Anton Siluanov warned Prime Minister Mikhail Mishustin that the government might not make all payments on time.

Advertisement

The government has since cut funding for areas outside war spending, public-sector salaries, the military, social programs, regional support and debt servicing by 35%, the people said. 

Federal agencies were also told to prepare for a 15% staffing reduction and postpone non-essential spending.

The squeeze came even as oil revenue rose to a six-month high during a spike in energy prices linked to turmoil around the Iran war. Russia’s budget deficit has widened to 6.5 trillion rubles, or 2.8% of gross domestic product, above the 1.6% target set for 2026.

The liquidity strain is serious but not critical, according to the people familiar with the matter, who said the budget can continue financing the war for several more years.

The government and Finance Ministry did not respond to Bloomberg’s requests for comment. Finance officials and the central bank have previously warned the Kremlin that war spending was becoming unaffordable.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
MACRO
Russia cuts spending after April cash crisis exposes war costs
Russia cuts spending after April cash crisis exposes war costs

Budgetary areas outside the war, salaries, social programs and debt service have faced 35% funding cuts since April.

By Editorial Team
Edited by Estefano Gomez

Share

Add us on Google

Russia imposed sharp spending restrictions after an April liquidity crisis exposed the rising cost of its war in Ukraine, according to people familiar with the matter.

The Treasury’s federal budget balances fell to a negative 5.5 trillion rubles ($65.3 billion) after Finance Minister Anton Siluanov warned Prime Minister Mikhail Mishustin that the government might not make all payments on time.

Advertisement

The government has since cut funding for areas outside war spending, public-sector salaries, the military, social programs, regional support and debt servicing by 35%, the people said. 

Federal agencies were also told to prepare for a 15% staffing reduction and postpone non-essential spending.

The squeeze came even as oil revenue rose to a six-month high during a spike in energy prices linked to turmoil around the Iran war. Russia’s budget deficit has widened to 6.5 trillion rubles, or 2.8% of gross domestic product, above the 1.6% target set for 2026.

The liquidity strain is serious but not critical, according to the people familiar with the matter, who said the budget can continue financing the war for several more years.

The government and Finance Ministry did not respond to Bloomberg’s requests for comment. Finance officials and the central bank have previously warned the Kremlin that war spending was becoming unaffordable.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.