(Reuters) – Russia plans to spend nearly a third of its budget next year on defense and internal security. Budgets allocated to schools, hospitals and roads will be cut in order to fund the maintenance of military operations in Ukraine.
The Russian government will spend a total of 9.4 trillion rubles ($21.5 trillion) on defense and security, according to a Reuters budget analysis. Next year will be a crucial year leading up to Putin’s re-election in 2024, but other priorities will be weighed down.
The security budget alone, which includes the work of the Investigative Committee of the Russian Federation, the Public Prosecutor’s Office, prisons and the National Guard deployed in Ukraine, will increase by 50% compared to 2022.
It will be a record defense and security budget for the Russian government, but the amount itself is dwarfed by next year’s U.S. defense budget and budget to meet some (but not all) of our homeland security needs. Only about 18%.
“The state budget has become a means of financing military operations,” said independent analyst Alexandra Susurina. “Although the budget for pensions and education has been increased, it pales in comparison to what Russia should be doing.
The Russian Finance Ministry did not respond to a request for comment.
Russia’s intention to leverage its military operations against Ukraine can be seen through the budgetary changes. Ukraine has suffered a major setback since September despite announcing the annexation of four partially occupied provinces. Putin has directed the government of the Russian Federation and the country’s more than 80 federal constituents to work together more effectively than ever to support military needs.
On the face of it, next year’s defense budget will amount to 4.98 trillion rubles, a meager 1 percent increase from the previous year. But that’s simply because the defense budget for this year has increased by a third from the original 3.5 trillion rubles since the February invasion of Ukraine.
By contrast, the domestic security budget is expected to grow by 50.1% year-on-year to 4.42 trillion rubles.
Putin has argued that sanctions against Russia are hitting the West like a boomerang. The West is struggling to cope with the worst inflation in decades as energy and food costs skyrocket. That said, Russia’s economy is not unscathed either.
Russia’s gross domestic product (GDP) fell 4% in the third quarter from a year earlier, reflecting Western sanctions and the government’s decision to call up 300,000 reservists. Hundreds of thousands of people are also fleeing the country to avoid conscription.
In the 2023 budget, expenditures related to the “national economy” such as roads, agriculture and research and development are expected to fall by 23% to 3.5 trillion rubles. Healthcare-related sales fell by 9% to 1.5 trillion rubles, while education-related sales fell by 2% to 1.4 trillion rubles.
According to a joint study by the Russian Presidential Academy (Ranepa) and the Gaidar Institute, spending on infrastructure and industry will fall by 23.5% and 18.5% respectively. The institutes said the budget cuts “could cause significant difficulties” as the government attempts to open up new markets outside the West.
Investment in research and development is also expected to be cut, and with sanctions preventing the latest technology from entering the country, “Many key industries will not be able to obtain the funds to develop domestic technology,” Renepa said. Looking.
Putin, who ran for a fourth term in 2018, has set a goal of making Russia the world’s fifth-largest economy by 2024. He pledged to invest more than $400 billion (about 55.6 trillion yen) in “national projects.”
Those targets were pushed back to 2030 under the coronavirus pandemic, but analysts say the risk of falling short of them again is increasing as the related budget is cut by 10% next year. do.
Social security-related expenditures such as pensions and welfare are a cornerstone of President Putin’s domestic economic policy, and were used to appeal to voters in the previous presidential election. Next year’s budget will total 7.3 trillion rubles, an 8% increase on the previous year, but still falls short of the combined military and security budget.
According to Ranepa and the Gaidar Institute, funding for the national program on education will be cut, but the budget for “patriotic education” in schools will be reduced to reflect Russia’s view of ongoing affairs and historical events. is expected to increase by 513% from this year.
The Higher School of Economics of the Russian State Research University said the reduction in medical costs “cannot be justified in light of the rising mortality rate due to the two factors of the corona crisis and poor access to medical services.”
Analysts expect Russia to double its fiscal deficit next year to 3 trillion rubles, equivalent to 2 percent of GDP, as sanctions squeeze revenue, but analysts say it could reach 4.5 trillion rubles. He says he has a gender.
To finance the budget deficit, the Treasury already has a sovereign wealth fund, the National Wealth Fund, and last week borrowed $14 billion in ruble-denominated bonds (OFZ).
It was the largest single-day bond issuance on record, and the Defense Ministry said on Twitter that it was a sign that Russia was borrowing to finance defense spending.
Russia’s public debt is expected to reach 17% of GDP next year, low by international standards. Analysts say the cost of debt service will rise to 6.8% of total spending in 2025 from 5.1% now, more than spending on health and education.
“From 2023 to 2025, public debt will grow faster than the country’s economic growth, indicating a less efficient use of borrowed funds,” said the Russian University of Finance, which will hurt economic growth. I am going to give
(Reporter Darya Korsunskaya)