Russia's federal budget will remain in deficit through at least 2042, according to a long-term forecast from the Ministry of Economic Development, reviewed by Vedomosti on December 16, as falling oil and gas revenues, rising debt, and persistent war-related spending push public finances further into unsustainable territory.

As bne IntelliNews reported, Russia’s budget deficit has already blown through all predicts made by Ministry of Finance (MinFin) at the start of this year. Originally targeting an almost balanced budget with a deficit of only 0.5% of GDP, MinFin was forced to triple that estimate to 1.7% in the middle of the year and even then it has sailed past that target too. Currently the deficit is 1.9% but with a fifth of all budget expenditure made in December, economists say that the end of year figure is likely to be 2.6% -- the highest deficit in years – and could even go as high as 3.1%, according to Janis Kluge, fellow at the Stiftung Wissenshaft und Politik (SWP), Eastern Europe and Eurasia Group.

Nevertheless, the ballooning deficit is not enough to force Russian President Vladimir Putin to end the war in Ukraine for the lack of funds. By comparison, the French budget deficit is 5.1% of GDP and expected to approach 6%, unless the current efforts to cut spending bear fruit.

Ukraine is in an even worse position, as bne IntelliNews reported in a side-by-side comparison of the Russian and Ukrainian economies. Ukraine’s budget deficit was 20.6% of GDP in 2024, is expected to be 18.5% this year, and drop to 15% next year, according to the budget forecasts. The International Monetary Fund (IMF) recently said Ukraine needs at least $65bn in external funding to cover the budget shortfall in 2026.

Russia’s budget is under pressure, but not in crisis. however, according to the new long-term forecast, the situation is even worse than first appears. According to the new 2026-2029 budget, just approved by the Duma, the forecast for the deficit is RUB1.6 trillion (0.9%) in 2026, RUB1.6 trillion (0.8%) in 2027, RUB1.6 trillion (0.7% in 2028, and RUB1.6 trilli0on (0.6%) in 2029.

These forecasts are based on core assumptions that include: an average Urals oil price of $60–65 per barrel, a ruble–dollar exchange rate of RUB90–RUB92, annual GDP growth of 2.3–2.5%, a continued decline in oil and gas revenues as a share of GDP, and sustained high military and security spending at around 30% of total federal expenditure—exceeding RUB10 trillion in 2025.

However, this forecast is looking widely optimistic to some economists. Even under the government’s baseline scenario, which assumes stable growth and relatively favourable commodity prices, the deficit is projected to reach RUB21.6 trillion ($237bn), or 2.9% of GDP, by 2042. In the conservative scenario, the shortfall swells to RUB54.7 trillion ($602bn), or 8.4% of GDP—nearly triple the current level.

While the Ministry of Economic Development acknowledges the limitations of making reliable twenty-year forecasts, it is legally required to update its long-term outlook every six years. The latest version relies on linear assumptions that many economists view as overly optimistic. These include an average Urals oil price of $69 per barrel from 2031 onwards, annual GDP growth of 3%, and a gradual weakening of the ruble to RUB133 per US dollar by 2042.

Oil and gas revenues, once the backbone of the Russian budget, are projected to decline from 4% of GDP in 2025 to just 1.9% by 2042. Meanwhile, non-oil and gas revenues are expected to remain flat as a share of GDP. In absolute terms, revenue will continue to rise, but its share of GDP is forecast to fall from the current 17.1% to 14.1% in the baseline case and 13.8% in the conservative case. Expenditures, however, are set to outpace this—rising to 17% and 22.2% of GDP, respectively.

Despite this widening gap, the forecast contains no plans for a radical increase in taxation. Instead, the government appears intent on maintaining current fiscal structures, including the National Welfare Fund (NWF), which supports infrastructure investments and budget shortfalls. The NWF, however, is projected to shrink dramatically—to 4.5% of GDP in the baseline and just 1% in the conservative scenario.

To finance the growing deficits, Russia’s public debt is expected to rise sharply. From RUB38.5 trillion (17.7% of GDP) in 2025, debt could increase more than sixfold to RUB238.5 trillion (32.2% of GDP) by 2042 in the baseline scenario. Under the conservative model, debt rises more than tenfold to RUB452.9 trillion—nearly 70% of GDP. This far exceeds the Finance Ministry’s own stated threshold for fiscal safety, which is 20%.

According to The Bell, the official numbers still understate the severity of the problem. “Russia’s low public debt, which supposedly allows it to finance the war without problems, is a myth,” the publication wrote. Domestic borrowing is both expensive and inflationary, particularly for a country cut off from global capital markets.

Russia already spends 1.5% of GDP on debt servicing. In relative terms, this is approaching the UK’s debt burden, despite Britain’s public debt standing at nearly 100% of GDP. “Unless the government cuts spending—preferably military spending—the only source of revenue for the budget will effectively be tax increases,” The Bell concluded.