russia Braces for Austerity as Budget Deficit Soars, Intelligence Suggests
Kyiv, Ukraine – Russian authorities are preparing citizens for a significant decline in living standards as the country faces a projected record budget deficit of 5.74 trillion rubles in 2025, according to a report from the Foreign Intelligence Service of Ukraine (FISU).
the FISU report, shared on Telegram and reported by Ukrinform, indicates the Kremlin intends to address the shortfall through a combination of tax increases and cuts to social programs. Regional officials and senators are expected to bear the brunt of public discontent resulting from these measures.
Planned tax hikes include an increase in Value Added Tax (VAT) from 20% to 22%, a lowering of the threshold for simplified taxation, and a review of benefits for self-employed citizens, currently taxed at a rate of 4-6%. The self-employment regime might potentially be eliminated entirely by 2026, compelling individuals to register as entrepreneurs or pay standard tax rates.
Intelligence suggests the government is also considering introducing social contributions for the officially unemployed, including freelancers and those working in the informal economy, framed as a matter of “social justice.”
Social programs are also slated for cuts. Maternity capital might potentially be limited to families with a third child,and the “family mortgage” program is expected to be funded by regional budgets. Already facing deficits in 68 regions, local governments are being pressured to increase taxes on transportation and parking.
These changes are a direct consequence of economic pressures stemming from the war in Ukraine and subsequent international sanctions, which have diminished Russia’s revenue streams. The kremlin is effectively shifting its social contract with citizens, moving from a system of “you don’t protest – we guarantee stability” to “you support the regime - you pay more.”
The Russian economy is currently experiencing a prolonged decline, with companies reporting increasing financial difficulties, expense reductions, and investment delays.
Read also: Russia facing mounting logistics crisis amid war and sanctions
Photo: Alex Volodsky on Pixabay
