Russian regions spent a lot of money last year, achieving record total budget deficit in the amount of approximately 1.48 trillion rubles (PLN 68 billion at the current exchange rate), as expenses continued to outpace revenue growth, the business newspaper Kommersant reported on Thursday.
The Kommersant daily, citing data from the ACRA rating agency, wrote that the overall deficit of regional budgets in 2025 was 3.6 times higher than in the previous year, when it amounted to 407 billion rubles (PLN 18 billion).
Total regional spending increased by 9%. to 24.1 trillion rubles (PLN 1.1 trillion), while revenues increased by 4%. to 22.6 trillion rubles (PLN 1.05 trillion).
In absolute terms, it is Moscow recorded the largest deficitreaching the level of 229 billion rubles (PLN 10 billion) – despite the surplus in the period from January to September 2025.
The next places were taken by the Yamal-Nenets Autonomous Okrug, the largest natural gas producing region in Russia, and the Khanty-Mansiysk Autonomous Okrug, one of the largest oil producers. They achieved deficits of 84 billion rubles (PLN 3.8 billion) and 72 billion rubles (PLN 3.3 billion), respectively.
One of many challenges
“It's no surprise that regions are struggling to balance their budgets. In 2025 they spent much more on the war than in previous years” wrote Janis Kluge, an economist at the German Institute for International and Security Affairs, in a report published earlier this month. “Regions also pay compensation for injuries and benefits to the families of deceased soldiers,” the expert added.
“If the Kremlin wants the regions to make the same contribution to the war effort as last year, it will have to increase budget transfers,” Kluge noted, referring to the federal funds the regions receive from Moscow.
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The regional budget deficit is only part of the larger financial challenges Russia faces. Especially since the Kremlin continues to incur high military spending.
Russia's federal budget deficit reached 5.64 trillion rubles (PLN 260 billion) in 2025, or approximately 2.6%. GDP. This five times more than the originally planned 0.5 percent. In 2026, the government forecasts a deficit of 3.8 trillion rubles (PLN 175 billion), or 1.6%. GDP.
“The situation looks much worse than originally expected.” — wrote Andras Toth-Czifra, a research fellow at the US Foreign Policy Research Institute think tank, in an analysis published this week.
Sources of pressure
“The negative trend over the past year due to increased regional spending, stagnant federal transfers and declining corporate taxes is obvious. War is an obvious source of pressure,” Toth-Czifra noted.
On Wednesday, in his annual address to lawmakers, Prime Minister Mikhail Mishustin said he had spent “many hours” with President Vladimir Putin and other senior officials discussing ways to close growing budget gaps.
In January, the Russian government raised VAT as the nearly four-year war against Ukraine blows holes in the state budget.
Last September, the Russian Ministry of Finance proposed increasing VAT from 20 to 22 percent. to cover the budget deficit caused by military spending. The Bell website estimated that such a step would generate 1 trillion rubles per year (approx. PLN 46 billion) for the budget. The Russian Ministry of Finance claimed that the money would be used primarily for “financing defense and security.”
Economists immediately began to warn that increasing VAT would slow down the economy, trigger a new wave of inflation and price increases for most goods and services, which would hit the pockets of every resident of the country.
I’m Ashley Davis as an editor, I’m committed to upholding the highest standards of integrity and accuracy in every piece we publish. My work is driven by curiosity, a passion for truth, and a belief that journalism plays a crucial role in shaping public discourse. I strive to tell stories that not only inform but also inspire action and conversation.
