Report: Putin to increase expenditure on defence and police, amid war in Ukraine

A report by Bloomberg indicated that Russian President Vladimir Putin is set to exceed the next two years’ initial budget estimates as he plans to add more than 43% to the category related to defence while an additional 40% to law enforcement and national security. This comes amid the country’s ongoing invasion of Ukraine and this increase is seen as an attempt to tailor Moscow’s budget for a long and increasingly expensive war.

Reportedly, Russia’s three-year fiscal plan is prioritising the military and moving away from categories like environmental protection, with a minimum increase in sectors like education and culture for 2023. Meanwhile, at least 5 trillion rubles ($84 billion) which is nearly 3.3% of the country’s GDP is being dedicated to “national defence”.

According to the Stockholm International Peace Research Institute (SIPRI), a think tank that tracks the global arms industry, Russia’s “national defence” line in the budget accounts for three-quarters of its total military expenditure and includes for operations and arms procurement. Meanwhile, Putin plans on spending a quarter less than the 0.2% GDP on the environment which was estimated earlier. On the other hand, the defence budget which was to decrease to 2.4% of GDP, from an estimated 3.2% in 2022 and 2.6% in 2021, said the Bloomberg report.

They further indicated that only overall figures were made public while the details of this increased military remain classified. The budget plan reportedly assigns the cost of the call-up to at least 16 billion rubles in 2023 and up to 16.5 billion rubles annually in 2024-2025.

This shift shows that Putin is set to escalate his efforts after a major setback faced in Ukraine as he also called for the “partial mobilisation” and drafted at least 300,000 more soldiers who are currently reservists in the Russian army.

SIPRI also indicated that Russia was one of the biggest spenders on defence last year and estimated that the country boosted its expenditure on the military in 2021 by 2.9% to $65.9 billion. This was straying away from the previous declines noted between 2016 and 2019 and indicated a third straight year of growth.

Reportedly, the budget was approved on Thursday by the government and is supposed by the two houses of parliament after which it will be signed by Putin to become law. The report also estimated a budget deficit of 2% next year, from 0.9% this year. The government also plans on borrowing up to $1 billion annually in foreign currencies, said the report.

Putin’s move to invade Ukraine has severely affected Russia’s economy, as, amid international sanctions, this diversion of resources and manpower to the military can worsen the recession in Moscow. This comes as the labour market is already stretched by poor demographics and with unemployment at an all-time low, says the report.

According to the budget, Moscow’s pipeline gas exports are set to drop by at least 40% between 2023 and 2025, given its stand-off with the rest of Europe, while crude shipments will see some improvement. Notably, the government’s balance sheet has managed to survive well amid the crisis, which the report has attributed to the country’s windfall earnings from the higher cost of commodities.

The budget has also allocated additional money for “patriotic education,” which aims to include history exhibits and equip schools with state symbols. Meanwhile, the defence budget is also set to go up by almost 30% in 2024 but is reportedly still in line with the projections for 2025.