Putin’s war economy ‘spiralling out of control’ and on brink of collapse, Kremlin chiefs warn
Vladimir Putin’s war effort is putting a huge drain on the Russian economy as the country’s deficit spirals out of control, senior Kremlin officials have warned.
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The Ministry of Finance and the Central Bank of Russia says there are “critical risks” for stability as the country’s deficit continues to expand amid unfettered spending.
Government sources say Russia’s defence budget threatens to worsen the deficit as Moscow continues to pour cash into its war effort, according to Bloomberg.
Russia’s federal budget deficit reached a huge 5.9 trillion rubles (around 2.5 percent of GDP) in the first four months of 2026, surpassing the deficit for the whole of 2025 (5.6 trillion rubles).
Senior Russian officials are calling for cuts or efficiency savings in military spending as it continues to expand at pace while the financial burden increases.
It comes as Russia’s latest wave of strikes reportedly cost £400 million and killed at least 18 people across Dnipro and Kyiv.
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Up to 653 drones and 73 missiles were unleashed on Ukraine in the attacks, which also left more than 100 people injured.
The Defence Ministry is reportedly defying calls for cuts and requesting extra funding.
The department is understood to be facing a massive three trillion rubles ($36 billion) shortfall this year.
Putin has reportedly ordered the finance ministry to look for savings in other parts of the budget before defence spending is slashed, Kremlin sources told Bloomberg.
The expanding deficit has already forced spending cuts in other areas, with public sector jobs are slashed and construction and infrastructure projects scaled back.
Meanwhile, military spending is predicted to climb 2 trillion rubles ($28 billion) higher than planned this year, an internal government document cited by the Financial Times revealed.
The letter, written by Finance Minister Anton Siluanov, warned that the government may need to freeze spending in other areas to cover the gap as the shortfall could soar to 4 trillion rubles ($56 billion) in the coming years in a worst-case scenario.
It comes after Putin publicly ordered officials to explain the stagnant state of the Russian economy.
He told his officials to find ways to restart growth, which has forecast to reach just 0.4% this year.
Businesses argue the best way to do so would be to end his war in Ukraine.
In another rare rebuke from a member of the Russian establishment, a parliament member from Siberia said the economy will not be able to last through the ongoing "special military operation", which is what the Kremlin calls its war in Ukraine.
The warning comes ahead of the St. Petersburg International Economic Forum, which runs from June 3 to 6.
Russia is currently experiencing the highest interest rates in two decades as debt levels surge.
Last week, the UK announced a new package of sanctions aiming to shut off funding to Russia’s war effort.
They target cryptocurrency exchanges and the so-called “A7 network”, which the Foreign Office said was being used by Russia to evade existing restrictions and channel funds to fuel its war against Ukraine.
Foreign Secretary Yvette Cooper said the UK would continue to work with allies to expose, disrupt and dismantle such networks and said there would be no “safe havens” for those enabling Russia’s aggression.