War in Ukraine: Russia will increase its defense budget by almost 70% in 2024

Russia is preparing for a long war. Defense spending in 2024 will increase by 68% compared to the previous year and reach 10.8 trillion rubles (106 billion euros at today’s exchange rate), the Ministry of Finance said in a document published on Thursday. A surge illustrating Moscow’s determination to continue its military intervention in Ukraine despite the human and economic costs.

Thus, the amount allocated to defense would be approximately 30% of total federal spending in 2024 and 6% of GDP. For the first time in the modern history of Russia. The budget allocated to homeland security will increase to 3.4 trillion euros (33 billion euros), representing almost 10% of annual federal spending.

The priorities of this budget are clear: “Strengthening the country’s defense capability” and “integration of new Ukrainian regions”, the annexation of which Moscow demands, as well as “social assistance to the most vulnerable categories of citizens”, a few months before the Presidential elections are scheduled for spring 2024.

“Necessary” increase

“It is obvious that such an increase is necessary, absolutely necessary, because we are in a state of hybrid war,” Kremlin spokesman Dmitry Peskov told reporters on Thursday. “I want to talk about the hybrid war that is being waged against us. And this requires a lot of expenses. »

By contrast, the combined spending on education, health care and the environment will amount to barely a third of the defense budget, according to the Treasury Department.

Weakness of the ruble in the medium term

Overall, federal spending will increase to 36.661 billion rubles (359 billion euros), an impressive jump of more than 20% compared to 2023. when, according to Prime Minister Mikhail Mishustin, revenues from the sale of hydrocarbons will decline sharply: in 2024 they will amount to “a third (of next year’s budget),” compared with almost half before the offensive on Ukraine.

The sector used to be the engine of Russia’s growth, but hydrocarbons’ share is declining under the weight of international sanctions and the Europeans’ determination to end their energy dependence on Moscow.

Finally, in a sign that the government expects a delicate coming months for the national economy, it made its budget forecasts based on the hypothesis of a dollar exchange rate of around 90 rubles, thus counting on a weakening of the national currency in the medium term.

The budget bill for 2024-2026 is due to arrive in the Duma on Friday.