Russia Strained by Military Spending, Records Second Largest Fiscal Deficit in History

Last Year's Fiscal Deficit 58 Trillion Won... 2.3% of GDP

[Asia Economy Reporter Yujin Cho] Russia, struggling to finance its war efforts, recorded the second-largest fiscal deficit since the dissolution of the Soviet Union last year.

On the 10th (local time), according to the New York Times (NYT), Russian Finance Minister Anton Siluanov announced at a government meeting that last year's fiscal deficit reached 3.3 trillion rubles (approximately 58 trillion won).

This amounts to about 2.3% of Russia's Gross Domestic Product (GDP). Although fiscal revenues increased by 2.8 trillion rubles last year, fiscal expenditures surged by 6.4 trillion rubles, widening the deficit.

[Image source=Yonhap News]

Russia's staggering fiscal deficit is presumed to be due to increased military spending amid the prolonged war with Ukraine. The war, which broke out in February last year when Russia invaded Ukraine, has continued for 11 months, triggering large-scale military expansion.

Finance Minister Siluanov stated, "Despite the geopolitical situation and (Western economic) sanctions, we achieved the planned goals," effectively acknowledging that increased military spending due to the war with Ukraine has impacted the national finances.

Last year's fiscal deficit of the Russian government is the second-largest since 2020, when the economy was severely contracted due to the spread of COVID-19.

However, the NYT evaluated that Russia performed better than Western experts' forecasts, which predicted a catastrophic collapse due to the aftermath of the Ukraine war.

It also reported that Russia plans to increase military spending by about 30% this year, and with the West's price cap on Russian crude oil inevitably affecting fiscal revenues, Russia is expected to run a large fiscal deficit again this year.

This content was produced with the assistance of AI translation services.