By Professor Julian Cooper
Key Takeaways:
Russia’s draft 2027–29 budget projects modest growth, falling inflation and continued deficits, with oil-and-gas revenue declining as a share of the total.
Military spending stays high, though reclassification of combat compensation into National defence explains a chapter shift; actual 2026 outlays may already exceed the 2027 plan in real terms.
The 2028–29 figures are provisional projections, and the final budget law may differ from the draft.
On 30 September the Russian Ministry of Finance sent the draft three-year budget for 2027–29 to the State Duma, the lower house of the federal parliament, for approval. The draft, like all bills, will have three readings in the Duma. At the first, on 28 October, the main parameters of the budget will be approved, in particular total revenue and spending for each year. At the second reading, probably in mid-November, the Duma will consider proposed amendments and a number are likely to be approved, although the already agreed spending totals for each year will not change. The final reading, following soon afterwards, will approve the budget as a whole and send it to the upper house, the Federation Council, which usually agrees budgets with little discussion. The draft will then be sent to President Vladimir Putin, who will probably sign it into law in early December.
This backgrounder examines what the draft budget reveals about Russia’s military spending intentions in the next three years.
The economic forecast behind the budget
The draft 2027–29 budget is based on an economic forecast covering the period 2027–29 prepared by the Ministry of Economic Development (Minekon; see note below). Gross domestic product (GDP) is forecast to increase by 0.6 per cent in real terms this year, 1.4 per cent in 2027, 1.9 per cent in 2028 and 2.4 per cent in 2029. The annual average rate of inflation is expected to fall from 6.1 per cent this year to 5.0 per cent in 2027, then to 4.0 per cent in 2028–29.
Unemployment is forecast to remain at only 2.3 per cent throughout the period, but the rate of investment is expected to fall by 5.4 per cent this year, then to show very slight growth in 2027, increasing by 3.0 per cent in 2029. Overall, it is an understandably cautious forecast, but if realized should make it possible for the Central Bank to gradually reduce its key interest rate, which is currently at 14 per cent.
The draft budget would see Russia in deficit through to 2029: by 3.2 per cent of GDP this year, 2.2 per cent in 2027, and 1.9 per cent in both 2028 and 2029. Following a trend of recent times, revenues from oil and gas exports will remain at a modest level, accounting for only 18.4 per cent of total revenue this year and falling to under 16 per cent in 2029. However, with tax increases (mainly to value-added tax) and other measures, total budget revenues are set to increase significantly. This means that sanctions targeting earnings from oil and gas will have diminishing impact.
Military spending in the draft budget
In Russia, ‘military spending’ almost always refers to expenditure under the budget chapter ‘National defence’. However, some spending included in the standard SIPRI definition of military expenditure comes under other budget chapters, in particular ‘Social policy’ and ‘National security and law and order’. The table below shows total planned military spending in 2027–29, as reflected in the draft budget, alongside planned military spending in the budget law for 2026.
Sources: Based on Russian Federal Law no. 426-ФЗ ‘О федеральном бюджете на 2026 год и на плановый период 2027 и 2028 годов’ [On the federal budget for 2026 and the planning period 2027 and 2028], 28 Nov. 2025; Ministry of Finance, Основные направления бюджетной, налоговой и таможенно-тарифной политики Российской Федерации на 2027 год и на плановый период 2028 и 2029 годов [Basic directions of budget, tax and tariff policy of the Russian Federation for 2027 and for the planning period 2028 and 2029], 1 Oct. 2026; and Russian State Duma, Draft Federal Law no. 615-9 ‘О федеральном бюджете на 2027 год и на плановый период 2028 и 2029 годов’ [On the federal budget for 2027 and the planning period 2028 and 2029], 30 Sep. 2026, appendices 10 and 13.
Note: Figures for 2026 are based on the budget law as adopted and have not been adjusted to reflect actual spending. Two budget lines within ‘Other military spending’ have to be partially or fully estimated: total spending on troops of the National Guard and total spending on the Federal Security Service (FSB) Border Service, the latter of which has not been revealed since 2021. Due to the author’s revision of these estimates, the figures for ‘Other military spending’ and ‘Total military spending’ in 2026 do not match those in previous SIPRI publications.
The evidence available to date suggests that total military spending in 2026 will be significantly larger than the budgeted total, perhaps reaching about 17 trillion roubles—in which case the military spending planned for 2027 could be less than this year’s spending in real terms.
One point worth noting is that for 2027 there has been a change in the source of funding of compensation for those injured in combat and for the families of troops killed in the combat with Ukraine. In the 2026 budget it was to be a classified component of spending under the ‘Social policy’ chapter, but this component is not present in the draft 2027 budget. This almost certainly accounts for the decline in military spending outside the ‘National defence’ chapter in the 2027 budget compared with that for 2026. Furthermore, it cannot be ruled out that this change was implemented during 2026, which would help to account for the scale of the increase in ‘National defence’ expenditure compared with the 2026 budget law.
A final point to emphasize is that the budgets for 2028 and 2029 do not in any way indicate future policy intentions; they are just projections and could change substantially when the budget for 2028 is drafted.
This brief analysis is based on the draft federal budget for 2027–29. Military spending in the final budget law could be different, as was the case with the 2026 budget, where ‘National defence’ spending in the budget law was lower than in the draft version. A longer, detailed, paper on Russian military spending will be published later in 2026 or early in 2027, after the new budget has been signed into law and more is known of budget implementation in the current year.
Note on the Ministry of Economic Development forecast
The economic forecast that the draft 2027–29 federal budget is based on is Основные макроэкономические параметры среднесрочного прогноза социально-экономического развития Российской Федерации до 2029 года, Базовый вариант [Key macroeconomic parameters of the medium-term forecast of socio-economic development of the Russian Federation to 2029, basic variant] from 26 September 2026.
About the author: Professor Julian Cooper is an Associate Senior Fellow with the SIPRI Military Expenditure and Arms Production Programme. He is also Emeritus Professor at the University of Birmingham Centre for Russian, Eurasian and European Studies.
Source: This article was published by SIPRI
