Russia risks being trapped in a debt spiral as rising government borrowing and high interest rates sharply increase debt servicing costs, according to a report by the Centre for Macro-Economic Analysis and Short-Term Forecasting (TsMAKP), cited by The Moscow Times on 14 July. The economists warn that growing repayment obligations could place mounting pressure on the federal budget in the coming years.
According to the report, Russia’s total state debt has increased by 68% since the start of the full-scale invasion of Ukraine in 2022, rising from 20.9 trillion roubles to 35.1 trillion roubles, or 18.1% of GDP. Under current budget plans, debt is expected to reach 43.7 trillion roubles in 2026 and 53.8 trillion roubles by 2028, approaching 20% of GDP.
Although Russia’s debt remains relatively low by international standards, borrowing costs are significantly higher. The Finance Ministry is paying around 16% annually on 10-year government debt, pushing interest payments sharply upward. Debt servicing costs have nearly tripled from 1.1 trillion roubles in 2021 to 3.2 trillion roubles in 2025, making them the fourth-largest category of federal spending after defence, social welfare and the national economy. TsMAKP projects these costs will rise to nearly 10 trillion roubles annually by 2028.
The report warns that the government could increasingly rely on new borrowing to refinance maturing debt while taking on additional loans to cover interest payments, creating a self-reinforcing debt cycle. TsMAKP recommends keeping government debt below 40% of GDP, with a precautionary target of 30%.
The economists also highlight broader fiscal risks, including weaker oil prices, slower export growth, demographic pressures, weak productivity and rising budget expenditures. Despite recent tax increases, including higher corporate taxes, a progressive personal income tax and a VAT increase to 22% in 2026, budget revenues have fallen short of expectations. Russia recorded a budget deficit of 5.7 trillion roubles in the first half of the year, and the report estimates the full-year deficit could widen to around 7 trillion roubles.
The report concludes that maintaining fiscal stability will become increasingly difficult over the next decade as debt costs, long-term borrowing needs and structural economic challenges continue to put pressure on the federal budget.
