Russia has already spent more than a third of the planned budget expenditures for this year as costs in all three of the major spending categories – housing, social, and military – are up year on year.

As Russia moves to amend its 2025 federal budget and update projections for 2026 and 2027, it is confronting the consequences of a slowing economy, lower-than-expected oil and gas revenues and a deepening dependence on military spending.

The revised budget forecast has already seen the federal budget deficit triple to 1.7% of GDP this year, up from the previously expected 0.5%, according to documents introduced to the State Duma on May 25.

That is still not a disaster. The deficit was 2.3% in 2022 after the start of the war, falling to 1.9% in 2023 and 1.3% in 2024. This year the deficit was supposed to fall again to 0.5% before the budget became balanced in 2026, but recent developments, and especially a fall in oil prices, have pushed the deficit up – albeit to easily manageable levels.

Janis Kluge, senior research fellow at the Stiftung Wissenschaft und Politik (SWP) in Berlin, noted in a blog that the newly released figures offer a rare glimpse into Russia’s budget execution for the first quarter of 2025, according to numbers released last week as part of a Ministry of Finance (MinFin) report to the Duma.

“Given that we don’t even have the 4Q24 data yet, this is a welcome look at the latest data,” he said. “This only covers open (unclassified) [military] spending, but classified spending can be calculated by comparing open spending to total spending, which is also published by the Finance Ministry.”

Three major spending categories stand out in the first quarter figures: housing, social policy and classified expenditure.

Housing: “Housing execution reached 38.3% of planned spending,” Kluge said. He attributed this to a technical factor: the legacy costs of a generous subsidised mortgage programme that ended last year.

“Until last summer, the Russian government offered subsidised mortgages, mostly at an interest rate of 8%. Since the budget has to compensate the banks for the delta between the market rate and the subsidised rate, the high key rate of the Central Bank of Russia leads to increased spending.”

Social: In the social policy sector, 30.9% of planned spending was already executed by the end of the first quarter. Social policy spending for 2025 has been reduced in nominal terms compared to 2024, as transfers to the pension systems are expected to decline due to the 2018 pension reform (raising the retirement age) and very low unemployment.

Kluge noted that while nominal social policy spending has decreased due to reduced pension transfers, actual first quarter transfers were higher than the same period last year.

“For 2024, the planned support for the pension system from the federal budget was about RUB4 trillion ($44bn), this year it is only RUB2.4 trillion. However, in the first quarter of 2025, transfers to the pension system were actually slightly higher than last year (RUB584bn instead of RUB520bn),” said Kluge.

“Sometimes there are unplanned transfers to the pension system, which may explain this,” he said. “However, the slight slowdown in the economy in the first quarter is unlikely to have caused higher spending here, so a question mark remains.”

Military: The most significant increase came in classified military spending, which rose from RUB2.5 trillion ($27.5bn) in the first quarter of 2024 to RUB3.6 trillion ($39.6bn) in the first quarter 2025. Over 80% of the military spending is classified.

“This is most likely due to spending on arms procurement,” Kluge said. “In its commentary, the Finance Ministry mentioned advance payments for procurement as a driver of more spending in the early months this year.”

Overall, Russia spent RUB11.2tn ($123.1bn) in the first quarter of 2025, compared to RUB9tn ($98.9bn) in the same period last year.

“About half of the increase is due to (mostly military-related) classified spending,” Kluge observed. “Taking into account that open defence spending also increased, this shows that further militarisation of the budget was the main driver of higher spending.”

He added that other structural pressures are emerging. “The impact of higher interest rates – on housing, but also on debt servicing costs – is also affecting Russia's budget balance,” he said.

* All the charts are  Kluge's own calculations based on the Russian Ministry of Finance's data. They first appeared in his substack post here.