Russia Adjusts 2025 Budget Amid Declining Energy Revenue and Escalating Deficit

On Wednesday, Russia’s State Duma, the lower house of parliament, approved revisions to the 2025 budget, which now anticipates a revenue decline exceeding $15 billion and a heightened deficit due to decreasing income from oil and gas.

The budget, endorsed by President Vladimir Putin in December, originally estimated revenues at 40.3 trillion rubles ($508.5 billion) with a planned deficit of 1.17 trillion rubles ($14.76 billion), corresponding to 0.5% of GDP. That initial proposal designated an unprecedented 40% of total expenditures for defense and national security purposes.

With the updated budget plan, revenue estimates have been adjusted down to 38.51 trillion rubles ($485.9 billion), reflecting a decrease of 1.79 trillion rubles. The projected deficit is anticipated to increase to 3.79 trillion rubles ($47.8 billion), or 1.7% of GDP, marking a rise of 2.62 trillion rubles.

These adjustments are influenced by a stronger ruble, decreasing global oil prices, and escalating military expenditures.

Current expectations indicate oil and gas revenues will amount to 8.32 trillion rubles ($104.8 billion), a reduction of 2.62 trillion rubles compared to earlier forecasts. Conversely, non-oil and gas revenues are predicted to grow by 829 billion rubles, reaching 30.19 trillion rubles ($380.3 billion).

Additionally, the government intends to boost total spending by 829 billion rubles, culminating in a total of 42.3 trillion rubles ($532.9 billion).

In the first quarter, Russia’s expenditures have already hit 11.2 trillion rubles ($141.1 billion), surpassing last year’s figures.

German economist Janis Kluge estimates that approximately one-third of this amount—specifically 3.6 trillion rubles ($45.3 billion)—was categorized as classified spending, likely allocated for defense purposes. Since 2023, Russia has increasingly prioritized military funding.

To manage the deficit, the government plans to withdraw 447 billion rubles ($5.8 billion) from the National Wealth Fund (NWF), which holds liquid assets amounting to 2.8 trillion rubles ($36.4 billion). Kremlin economists have cautioned that, under current conditions, the fund may be fully depleted by 2026.

The revised budget will now be submitted to the Federation Council, the upper house of parliament, for approval before being enacted into law by Putin, who has focused on increasing defense expenditures.