Get the latest tech news

Russia's Hidden War Debt

Moscow has been stealthily funding much of its war costs with risky, off-budget financing overlooked by the West. That funding is now under pressure, offering new leverage to Ukraine and its allies.

In late 2024, the Kremlin became increasingly aware that its off-budget funding scheme is unleashing potentially disruptive systemic financial risks, such as prohibitively high interest rates, liquidity and reserve problems at banks, and a severely compromised monetary transmission mechanism. 1)The Russian state has been pursuing a two-track strategy to cover its mounting war costs, supplementing highly scrutinized defense budget expenditures with funding from an off-budget financing scheme that is of similar scale, but has been largely overlooked. This off-budget funding stream is authorized under a new law, quietly enacted on February 25, 2022, that empowers the state to compel Russian banks to extend preferential loans to war-related businesses on terms set by the state.Since mid-2022, Russia has experienced an anomalous 71% expansion in corporate debt, valued at $415 billion or 19.4% of GDP (see Figure 1).

Get the Android app