Russia to cut welfare, education funding in 2027 as war spending soars

Russia is set to reduce welfare, education, and healthcare funding in its 2027 state budget, according to fiscal documents obtained by Reuters. With military spending projected to soar, the document reveals that defence spending will increase by 17.1 trillion roubles (US$202.58 billion), a 27% rise from the initial budget and the highest since the war in Ukraine began in 2022.

Social policy funding, encompassing state pensions, war veteran payments, and maternity benefits, will decline by 7%, while education funding will drop by 6% and healthcare funding by 6.8% compared to the original plan. Infrastructure spending, including road construction and subsidies for agriculture and other sectors, will also contract by 7.4% in 2027.

The national economy section of the budget, covering these areas, is expected to shrink by 7.4%. Russia has struggled with mounting financial challenges throughout the four-and-a-half-year war in Ukraine, resorting to tapping its fiscal reserve fund, increasing borrowing, and raising taxes to sustain its military expenditure. The government is currently drafting a three-year budget to enhance long-term planning, but has had to frequently revise figures upwards and has consistently fallen short of its annual deficit targets.

The new tax hikes and increased utility tariffs, announced following the recent parliamentary election, have sparked discontent among even some pro-Kremlin supporters. The ruling United Russia party is anticipated to endorse the new budget, emphasizing the priority of winning the war over other needs. Although overall non-military spending is diminishing, debt-servicing costs are on the rise due to elevated interest rates and increased borrowing plans.

Debt-servicing costs are anticipated to surge by 21.6% in 2027, reaching 9.4% of total spending, and further increase to 10.6% in 2029.