February 2026. Somewhere in Chelyabinsk, a machine-building plant transitions to a three-hour working day — state orders are being reduced. In Moscow, Finance Ministry officials hold closed meetings. And in public reports, a figure appears that is hard to explain without consequences: Russia's federal budget deficit for January-March 2026 exceeded $58 billion.
This is more than the Kremlin had set as a limit for the entire year.
What Happened to the Money
The Russian budget relied on two pillars: oil and gas revenues and domestic borrowing. Both are now under pressure. Urals prices have been trading well below the break-even level that Russia's Finance Ministry built into the budget — around $70 per barrel. Meanwhile, military spending is not being reduced: according to estimates by CREA and Kyiv School of Economics analysts, Russia's military expenditures in 2025-2026 account for over a third of the federal budget.
When revenues fall while spending is locked in by weapons contracts and "combat" payments, the deficit is not planned — it emerges as a fact.
Three Months Instead of Twelve
Exceeding the annual planned target already in the first quarter is not a technical planning error. It is a signal of structural imbalance. Russia either deliberately underestimated forecasts in official documents, or does not control spending dynamics, or — most likely — both.
For comparison: Ukraine in 2022-2023 also had a colossal deficit, but it was covered by international grants and loans with transparent reporting to donors. Russia closes the hole mainly through domestic bond borrowing — OFZ — which are purchased by state banks essentially with central bank emission money. This is not external debt, but it is not free either: inflation in Russia already exceeds 9%, the Central Bank of Russia's key rate is held at 21%.
From Figures to People
An abstract deficit becomes concrete when regions begin to delay social payments and defense companies reduce civilian contractors. This is what fiscal stress looks like at the level of an individual city: not a declared collapse, but a gradual tightening of possibilities.
Economist Aleksandra Prokopenko, former director of the Central Bank of Russia's department who emigrated after 2022, has repeatedly noted in her materials for the Carnegie Endowment: the Russian economy does not collapse instantly, it degrades in layers — first the periphery, then the middle class, then institutions.
What Is Not Visible in the Numbers
$58 billion in deficit is the official figure from Rosstat and Russia's Finance Ministry. The real figure may be larger: part of military spending goes through extrabudgetary funds and state corporations that are not consolidated in federal reporting. Independent verification is impossible — Russia has significantly restricted the publication of budget details since 2022.
In other words, $58 billion is what the Kremlin decided to show. The lower bound, not the upper.
What Comes Next
Russia has several tools to plug the hole: the National Welfare Fund (NWF), whose reserves have been significantly reduced since 2022, new borrowing, and, as a last resort, direct monetization of debt. Each of these paths has a price — inflationary or political.
The critical question is not whether the Russian economy will collapse — it will not collapse instantly. The question is at what level of fiscal exhaustion the Kremlin will be forced to choose between payments for "combat" contracts to contractors and funding for new offensive operations — and whether this choice will occur before or after the next major strike on Ukrainian infrastructure.
