New report | Behind the budget: Hidden spending and financial fragility in Russia
As part of its ongoing research on the economic consequences of Russia’s full-scale invasion of Ukraine, SITE has presented a new report to Sweden’s Minister of Finance. The report provides updated insights into the growing imbalances in the Russian war economy and the financial challenges the government faces in sustaining its current level of military spending.
On April 17, 2025, SITE presented its latest report, Financing the Russian War Economy, to Sweden’s Minister of Finance, Elisabeth Svantesson. This report builds on SITE’s earlier analysis, The Russian Economy in the Fog of War, presented in fall 2024, and offers an updated assessment of the economic strains emerging within Russia’s wartime economy.
The new report highlights a sharp increase in off-budget military spending, which significantly exceeds what is captured in official statistics. As a result, the true cost of the war—both in terms of actual expenditures and future financial liabilities—is far greater than what appears in the government's budget or debt figures.
Much of Russia’s economic data is now tightly controlled or simply not published. Trying to map out the real inflation rate or level of indebtedness is like piecing together a puzzle with missing parts—but it is clear that macroeconomic and financial imbalances in Russia have grown since last autumn.
With oil prices declining and fiscal reserves nearing depletion, Russia faces mounting pressure to address growing macroeconomic and financial imbalances. If current levels of military spending persist, the government will soon be confronted with difficult policy trade-offs to stabilize the economy.
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Contact
This report was written by a team of researchers at SITE, affiliated with the Stockholm School of Economics (SSE).
Anders Olofsgård, Deputy Director at SITE and Associate Professor at SSE.
Email: Anders.Olofsgard@hhs.se
Phone: +46 (0) 70 385 9097
About SITE
The Stockholm Institute of Transition Economics (SITE) is a leading research and policy center on economic development in low-and middle income countries, with a particular emphasis on transition in the former Soviet Union and Central and Eastern Europe.
About the FREE Network
The Forum for Research on Eastern Europe and Emerging Economies (FREE Network) is a joint initiative by SITE (Stockholm), BEROC (Vilnius), BICEPS (Riga), CenEA (Szczecin), ISET-PI (Tbilisi), AUA (Yerevan), and KSE Institute (Kiev). Together, these research institutes form an extensive network of leading academic experts on economic issues in Central and Eastern Europe and the former Soviet Union.
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