Russia wages war with borrowed cash

Hello! This week we dive into how Russia finances its war on Ukraine, and why it could be storing up problems for the future.

How much is Russia borrowing for its war, and what will the consequences be?

Russia’s invasion of Ukraine has forced Moscow to abandon its conservative financial approach and borrow more and more to fuel the military and its economy. The government plans to cover almost the whole of next year’s budget deficit by borrowing on the domestic market. This week the government tripled its planned bond placements for the final quarter of 2025. Russian officials, President Vladimir Putin chief among them, love to boast about how easily Russia can borrow, touting Moscow’s very low level of state debt by global standards. Despite that, it’s getting ever more expensive for Russia to service that debt. That could fuel yet more inflation, as state-owned banks purchase more government bonds and the state’s appetite for borrowing makes commercial loans even more expensive for business.