Russia's government is preparing the option of trimming non-sensitive line items in the 2026 budget by about 10% as it seeks to shore up fiscal buffers and limit additional borrowing, sources close to Finance Ministry briefings told Reuters.
Officials say the choice to impose such reductions is not final and will depend heavily on the durability of recent oil price gains linked to tensions in the Middle East. The possible move comes as Moscow confronts a combination of weaker energy receipts and a slowing domestic economy, both of which have dented tax collections outside the hydrocarbon sector.
What officials are discussing
According to people with knowledge of internal Finance Ministry communications, ministers and budget agencies have been instructed to identify areas where spending could be optimised. One source, speaking on condition of anonymity because of the sensitivity of the deliberations, said the Finance Ministry has told agencies distributing budget funds that there is a need to cut spending and that those agencies are assessing where reductions could be made.
Two of four sources familiar with the ministry's exchanges specifically cited a 10% figure for reductions to non-sensitive spending. The other two said reductions are being discussed but did not offer a precise percentage.
The Finance Ministry told Reuters that it is working with other ministries to prioritise budget spending. Andrei Gangan, head of the central bank's monetary policy department, said an optimisation of spending can only be welcomed.
Scope and limits of cuts
Officials emphasise that any savings drive would not be uniform across all budget lines. The government has made clear that expenditures related to what it calls its "special military operation" in Ukraine and social obligations to citizens - including public sector salaries and welfare payments - would be protected from reductions.
Sources described the proposed approach as targeting non-essential expenditures and new projects that can be deferred. Infrastructure items such as construction projects and road repairs were highlighted by one source as likely candidates for suspension or scaling back.
"This is always done by optimising non-essential expenses. Some new projects will be put on hold, such as construction or road repairs. These are likely to be considered for cuts," one source said.
Fiscal backdrop
The budget picture has been deteriorating. In the first two months of 2026, energy-related budget revenues fell by half while overall federal receipts slipped by 11%. Moscow, which twice raised its deficit estimate last year, plans for a budget deficit equal to 1.6% of gross domestic product in 2026.
To prevent the depletion of its fiscal buffer, the government intends to route more revenue into the budget reserve fund. That policy tweak could be accompanied by the spending restraint now under consideration.
Earlier this year, Russian President Vladimir Putin convened a late-night meeting on the budget in the Kremlin. Prime Minister Mikhail Mishustin described the session as lasting many hours. Following the meeting, Finance Minister Anton Siluanov said the government would lower the so-called "cut-off" price of oil - the threshold above which energy receipts are channelled to the reserve fund - which is currently set at $59 per barrel, to better reflect market reality.
In February, the average price of Russian oil used for taxation purposes was 24% below that cut-off level, forcing the government to tap the National Wealth Fund to close the gap.
Role of oil prices
Recent shocks in the Middle East have altered the outlook for Russian energy demand and pricing. After U.S. and Israeli strikes on Iran and the temporary closure of the Strait of Hormuz, oil prices spiked and demand for Russian crude increased, prompting discussions in Washington about easing some sanctions.
Some of the sources cited in the ministry discussions believe that the oil price increase may not be sustained over the long term and that the current fiscal shortfall necessitates spending restraint independently of short-term swings in commodity markets. Others said no final decision has been made and that policymakers are waiting to see how oil prices evolve amid the Iran conflict.
"Decisions on the extent of spending cuts have not been made yet, as everyone is waiting to see how oil prices will change as a result of the conflict in Iran," one source said.
Household and economic impact
Inflation has eroded real incomes for ordinary Russians, but the wider economic slowdown driven by elevated interest rates has not yet translated into widespread job losses, and government austerity measures so far have not produced mass layoffs, according to the sources. Western sanctions continue to constrain Russia's position in global energy markets and complicate sales abroad.
The ultimate shape and scale of spending cuts remain subject to internal deliberations at the Finance Ministry and intergovernmental consultations. Officials are balancing the need to rebuild fiscal reserves and avoid higher borrowing against a stated commitment to protect defence outlays and social payments from reductions.
Until a formal decision is announced, the government appears prepared to use a mix of reserve-fund top-ups and targeted spending optimisation as its main tools for managing a tighter fiscal year in 2026.