Russia Budget Deficit Nears Full-Year Target in Just Six Months

Russia’s budget deficit has surged to alarming levels, hitting 97% of its full-year target by mid-2025. Falling oil and gas revenues, combined with a sharp rise in government spending, are putting unprecedented strain on the country’s finances. The Russia budget deficit is now the largest for the first half of any year since the war began. The findings come from a new report by Benjamin Hilgenstock, Yuliia Pavytska, and Matvii Talalaievskyi of the KSE Institute.

Economic Strains Push Russia’s Finances to the Brink

In early 2025, low global oil prices dealt a major blow to Russia’s revenue streams. Although prices briefly spiked in June due to Middle East tensions, they soon fell back to $50–55 per barrel. This sustained drop cut oil and gas income by 17% year-on-year, leaving the government struggling to meet budget plans and worsening the Russia budget deficit.

Mounting Pressure on State Finances

By June, the budget deficit had climbed to 3.7 trillion rubles—over five times higher than in the same period of 2024. Government spending rose 20%, while non-oil revenues increased by just 13%. The Russia budget deficit has already nearly equaled the planned total for the year, making it almost certain the target will be missed.

Key Research Findings

• The Russian budget deficit reached 97% of the annual target in just six months.
• Oil and gas revenues dropped 17% year-on-year, while government spending rose 20%.
• Domestic debt issuance in H1 2025 was 90% higher than in the same period last year.
• The National Welfare Fund’s liquid assets exceed the mid-year deficit by only 12%.

Outlook: Risks and Financing Challenges

If oil prices remain low, the Russia budget deficit will likely surpass forecasts by a significant margin. This could force the government to draw heavily on the National Welfare Fund and increase domestic debt issuance. While demand for bonds from Russian banks remains strong, the long-term sustainability of financing is questionable without a rebound in export revenues.

Meet the Researchers

• Benjamin Hilgenstock: Head of Macroeconomic Research and Strategy, KSE Institute
• Yuliia Pavytska: Manager of the Sanctions Programme, KSE Institute
• Matvii Talalaievskyi: Analyst, KSE Institute

Read the Full Report

Explore the full findings and detailed analysis by reading the complete report on the KSE Institute website. You can also explore more policy briefs covering sanctions against Russia and Russian counter-sanctions in the FREE Network’s policy briefs section.

Explore Other Editions of KSE Institute’s Russia Chartbook

• KSE Institute’s Russia Chartbook – August 2025
• KSE Institute’s Russia Chartbook – July 2025
• KSE Institute’s Russia Chartbook – June 2025
• KSE Institute’s Russia Chartbook – May 2025
• KSE Institute’s Russia Chartbook – April 2025
• KSE Institute’s Russia Chartbook – March 2025
• KSE Institute’s Russia Chartbook – February 2025
• KSE Institute’s Russia Chartbook – January 2025