Russia's 2027 budget lowers the oil anchor and raises defence

Russia's draft budget for 2027–29 makes one conservative assumption and several generous ones. It plans the state's finances around oil at $50 a barrel, well below this year's reference price, which protects the spending plan against a weaker oil market. It then assumes that growth recovers, inflation returns to target, new taxes raise what they are expected to raise, and domestic lenders absorb a larger borrowing programme. The oil assumption is the safest part of the plan. The rest carries the risk.

What the government submitted

The cabinet approved the draft on 24 September and sent it to the State Duma on 30 September, according to Interfax and Vedomosti. For 2027 it plans revenue of RUB43.3tn and spending of RUB48.8tn, leaving a deficit of RUB5.5tn, or 2.2 per cent of GDP. The later years follow the same pattern: revenue of RUB45.8tn and RUB48.6tn in 2028 and 2029, spending of RUB50.9tn and RUB53.9tn, and deficits of RUB5.1tn and RUB5.3tn. The Finance Ministry describes a deficit of about 2 per cent of GDP a year across the period.

Finance Minister Anton Siluanov called the budget "balanced" and said it would allow the state to meet all its obligations while keeping macroeconomic stability. The ministry lists its priorities as social obligations, defence and security, support for participants in what it calls the special military operation and their families, and technological development. Pensions are to be indexed twice in 2027, by 6.8 per cent from 1 February and by a further 3.3 per cent from 1 April, according to Vedomosti.

The year-on-year comparison depends on which 2026 figure is used, and the published estimates differ. Alexander Kolyandr of CEPA puts 2026 spending at RUB46.15tn, which would make 2027 a nominal rise of about 6 per cent. Reuters, citing government documents, reports 2026 spending rising to RUB48.6tn, which would make 2027 almost flat in nominal terms. On either figure, with inflation this year running at 6–7 per cent, federal spending outside the protected lines falls in real terms.

The oil anchor moves down

The main technical change is to the budget rule. From 2027 the cut-off price, above which oil and gas revenue is saved in the National Wealth Fund rather than spent, drops from $59 to $50 a barrel. The previous plan was to lower it by $1 a year to $55 by 2030. Siluanov's argument, reported by The Moscow Times, is that spending should be financed at a price the state can count on, with any upside saved. CEPA notes that an average price of $53 a barrel would send only a small amount into the fund.

The change follows a weak year for hydrocarbon income. Reuters reports that the government cut its 2026 oil and gas revenue estimate from RUB8.9tn to RUB7.6tn. The fund's liquid assets, in gold and yuan, stood at about RUB4tn on 1 September, against RUB9.7tn in February 2022, according to CEPA and The Moscow Times. The draft does not reset the rule in one step: Profile reports that spending above what the rule allows falls from RUB1.5tn in 2027 to RUB0.5tn in 2028, with full compliance planned for 2029.

Defence takes a larger share

The published summaries describe defence and security as a priority but give no totals. Government documents seen by Reuters put 2027 spending under the national defence heading at RUB17.1tn, 27 per cent more than the RUB13.5tn pencilled in for 2027 a year ago, and total defence spending of RUB50tn over the three years. Measured against planned federal spending of RUB48.8tn, RUB17.1tn is about 35 per cent. The 2026 baseline is itself uncertain: Reuters gives a planned RUB12.1tn and says the actual figure is classified, while Meduza cites RUB12.93tn.

Civilian lines absorb part of the adjustment. Kommersant reports spending consolidation of about RUB2tn. The Cursor analysis centre, cited by the outlet Vazhnye Istorii, found cuts in eight of eleven large federal health projects, including a fall in funding for regional polyclinic construction from RUB122.47bn to RUB59.1bn. The government, for its part, points to more than RUB7tn for healthcare in 2027 across the federal budget and compulsory medical insurance.

Taxes and borrowing close the gap

Revenue is planned to grow 7.5 per cent. Most of the new measures are narrow rather than broad. Income from deposits, dividends and securities is to be taxed on the progressive personal income tax scale of 13–22 per cent, which Kommersant says affects about 4 million people with deposits above RUB1m. Metals and fertiliser producers face a one-off 30 per cent levy on earnings above 2025 levels and gold miners 20 per cent, which Reuters says should raise about RUB200bn a year. Cross-border online purchases will pay VAT at the full 22 per cent rate, plus a RUB100 customs fee on parcels under €200. Dividends paid to non-residents are to be taxed at 35 per cent, up from 15 per cent, according to CEPA.

Borrowing carries the rest. Reuters reports that total state borrowing in 2027 rises 43 per cent to RUB7.7tn and that state debt rises from 19.9 to 21.7 per cent of GDP, above the 20 per cent level officials have treated as safe. Domestic state debt rose from RUB23.7tn at the start of 2025 to RUB33.2tn in September, according to CEPA, and The Moscow Times estimates this year's debt service at close to RUB4tn. Siluanov has warned that rising debt "will crowd out all other spending".

The assumptions carry the risk

The record of recent budgets explains the caution among outside analysts. The 2025 budget planned a deficit of 0.5 per cent of GDP and ended at 2.6 per cent, according to CEPA. The 2026 deficit reached RUB5.8tn, or 2.5 per cent of GDP, in the first eight months, against RUB3.8tn planned for the whole year. Official end-year estimates now range from Siluanov's "no more than 3%" to the 3.2 per cent of GDP reported by Reuters. Kommersant noted that the parameters are to a large degree conditional, because budgets have not been executed as written in recent years.

Growth is the second assumption. The government expects 1.4 per cent GDP growth in 2027; the Bank of Russia projects 1.2 per cent and the OECD 0.6 per cent, according to CEPA. Rosstat's data show an economy that contracted by 0.2 per cent year on year in the first quarter and grew 1.3 per cent in the second, for 0.6 per cent in the first half. The third is inflation. The Bank of Russia held its key rate at 14 per cent on 11 September, with annual inflation at 6.3 per cent, and said that pro-inflationary risks prevail, citing fuel prices and temporary capacity losses. It still expects inflation to return to 4 per cent in 2027. Governor Elvira Nabiullina said that fiscal parameters matter for its decisions and that the rate "cannot be cut automatically".

What to watch

The first test is the Bank of Russia's meeting on 23 October, its first after the draft. A decision to hold would signal that the regulator sees the fiscal plan as adding to demand; a cut would suggest it accepts the consolidation as credible. The second is demand at domestic bond auctions, since a 43 per cent rise in borrowing has to be absorbed largely by Russian banks. The third is the out-turn for 2026 itself. If the year ends above 3 per cent of GDP, the 2027 plan starts from a weaker base than the one it was drafted on. The Duma is likely to pass the budget largely as submitted. The execution, not the vote, will show whether the $50 anchor protects the plan or only its headline.

Sources

• Interfax — Government submits 2027–2029 draft budget to the State Duma
• Kommersant — Government approves 2027 draft budget with a deficit of 2.2% of GDP
• Vedomosti — Main points of the 2027–2029 draft budget
• Reuters (via Yahoo Finance) — Russia raises 2027 military spending by 27%, budget documents show
• CEPA — Russia's 2027 budget: guns now, pay later
• Bank of Russia — Bank of Russia keeps the key rate at 14.00% p.a. (11 September 2026)
• Interfax — Rosstat confirms Q2 2026 GDP growth at 1.3% year on year
• The Moscow Times — Russia has a budget problem. Borrowing its way out won't be so simple