Here's How Russia Plans to Pay for the Ukraine War in 2027

Russia is preparing for an extended conflict in Ukraine by increasing defense spending and cutting civilian programs, according to a draft 2027 budget unveiled on Thursday. The budget sets aside 17.1 trillion rubles ($205.2 billion) for defense, a 26% increase from the previous year and nearly triple the 2021 pre-war level. Analysts say the Kremlin is bracing for a prolonged war despite claims of readiness for peace talks.

Defense spending will account for about a third of federal spending next year, a post-Soviet record. The budget also projects government debt to rise and increased borrowing to cover the shortfall. To help finance the increased military spending, the government plans to cut healthcare, education, and social programs by about 5-6%.

Additionally, it proposes a range of tax increases, totaling up to 1.5 trillion rubles ($18 billion), including a higher value-added tax on foreign online purchases and customs fees on parcels. These measures aim to raise additional revenue but may strain the economy and put pressure on the Central Bank to support the wartime economy through easier borrowing conditions.