Russia’s federal budget draft for 2026–2028 foresees a reallocation of resources from social and regional programmes toward the military-industrial complex and security forces.
The government plans to raise the VAT rate from 20% to 22%. Finance Minister Anton Siluanov acknowledged that this will lead to higher prices and increased pressure on businesses. Starting in 2026, a new taxation system will be introduced for small and medium enterprises: the annual income threshold for the simplified system will drop from about $723,000 to $120,000, and IT companies will lose preferential insurance contributions, which will rise from 7.6% to 15%.
Funding for 18 of 51 state programmes will be cut. The largest reductions will hit the “Chemical and Biological Safety” programme (–36%), “Aviation Industry Development” (–30%), and “Energy Development” (–29%). Meanwhile, allocations for “Electronic and Radio-Electronic Industry Development,” in support of the military-industrial complex, will increase 4.4 times, reaching $2.2 billion in 2026.
The increase in taxes and cuts to social spending indicate attempts by the authorities to sustain growing military expenditures at the population’s expense. The Pension and Social Insurance Fund, which provides benefits to 40 million Russian pensioners, is projected to run a deficit of about $8.3 billion this year.
At the same time, the maintenance of President Putin and his administration will again cost more, rising to $354 million in 2026 (around $1 million per day), exceeding the annual budgets of regions like Kalmykia or the Jewish Autonomous Region.
