Russia to Trim Welfare, Education and Health Funding as Defence Costs Climb
Russia's 2027 draft budget raises defence spending by 27% while cutting welfare, education and healthcare funding, alongside new tax hikes.
Russia plans to reduce funding for welfare, education and healthcare in its 2027 state budget while sharply increasing military expenditure, according to fiscal documents.
Defence spending is projected at 17.1 trillion roubles ($202.58 billion) in 2027, about 27% above the 13.5 trillion roubles originally budgeted and the highest level since the war in Ukraine began in 2022.
To accommodate that increase, social policy funding — which covers state pensions, payments to war veterans and maternity benefits — will fall by 7% compared with the initial plan. Education funding will drop by 6% and healthcare by 6.8%. Spending under the "national economy" section, which includes road construction, other infrastructure projects and agricultural subsidies, will shrink by 7.4%.
The budget documents also outline new tax increases for 2027 and a larger-than-expected rise in utility tariffs planned for next year, measures announced after this month's parliamentary election. The proposals have drawn criticism even from some Kremlin supporters.
The new State Duma, where the pro-Kremlin United Russia party holds a constitutional majority, is expected to approve the budget. Authorities have said winning the war in Ukraine takes priority over other needs.
Russia's fiscal position has weakened over the 4-1/2 years of the conflict, with the government drawing on its reserve fund, raising borrowing and increasing taxes to sustain military spending. Although the budget is being drafted on a three-year horizon to improve long-term planning, figures have had to be revised sharply upwards each year and annual deficit targets have been repeatedly missed.
The federal budget does not include regional and municipal budgets, which account for a substantial share of social spending.
While non-military spending contracts overall, debt-servicing costs are climbing because of high interest rates maintained by the central bank to fight inflation and increased borrowing plans. Debt-servicing costs will rise by 21.6% in 2027 compared with the initial plan, reaching 9.4% of total spending that year and increasing further to 10.6% by 2029.