Government officials have warned Russian President Vladimir Putin that Russia can no longer afford the costs of the war with Ukraine, writes Bloomberg, this is a serious sign of internal disagreements in the Kremlin, reports Focus.
Russian economists from the Ministry of Finance and the Central Bank claim that the continuation of the war will lead to a dangerous increase in the deficit in the state budget. Media sources indicate that getting the economy out of this difficult state will be extremely difficult.
"Nevertheless, disagreements have arisen among politicians: officials from the Ministry of Defense and some Kremlin representatives, determined to pursue Putin's military goals, insist on maintaining military spending. According to them, their reduction will cause serious damage to the economy, since many enterprises depend on contracts related to the military industry“, the article states.
Sources also reveal that Putin has ordered to reduce all expenses except for the military. And the Ministry of Defense is not only resisting the cuts, but also demanding additional funding. Military spending, on the contrary, is planned to be increased to cover the budget deficit of $ 36 billion.
The journalists write that at the time of preparing the budget “ there were hopes of an end to the war after the Alaskan summit“. But this did not happen and now “ Putin is faced with a difficult choice, responding to internal warnings about the consequences of the war“. His disappointment is even expressed publicly when he demands an explanation for why he has not been able to avoid a slowdown in growth rates.
The situation is not saved by the rise in oil prices in connection with the war in Iran. Russian economists believe that for this the price of oil must remain above $100 per barrel for at least a year. And already now the deficit in the Russian budget has grown to 2.5% of GDP, which is about 50% above the annual plan.
To save the economy, which has also been weakened by sanctions, the Russian government has increased taxes this year. But to continue fighting the budget deficit, it must cut spending or start looking for new sources of revenue. For example, the possibility of introducing a tax on excess profits for some raw material producers and banks is being considered. It is also known that job cuts are planned in the Moscow government.