Russia’s economy is weakening, the central bank is intervening again. But is that enough to solve Putin’s debt problem?
April 26, 2026, 11:25 amApril 26, 2026, 11:25 am
Thomas Wanhoff / t-online
The Russian central bank cut its key interest rate on Friday for the third time this year, the twelfth time in a year. It is now at 14.5 percent. The interest rate cut is apparently intended to stimulate growth – and give the state the opportunity to take on further debt. But while Putin’s bankers talk about a stable situation, the truth is apparently different. As the American Institute for War Studies (ISW) reports, the Russian economy is weakening significantly.
Russian President Vladimir Putin and Duma Speaker Vyacheslav Volodin at an exhibition. The debt burden could become a problem for Russia.Image: keystone
The low unemployment rate reported by Moscow is a sign that there are hardly any workers left. The institute expects wages in the civilian and military sectors to rise, which in turn may increase inflation. US analysts assume that the actual inflation rate in Russia is significantly higher than officially stated.
Added to this are the debts that Putin’s government took on to finance the war against Ukraine. In addition, the company’s own financial reserves have largely been used up. Moscow even began selling parts of its gold reserves in November.
Ukraine: Russian deficit rises sharply
According to Russian media reports, the number of planned layoffs has increased by 43 percent. Oleg Sokolov, a representative of the Federation of Independent Trade Unions of Russia, told the Russian newspaper Vedomosti that a lack of funding could spur layoffs due to deficits at the federal and regional levels.
The Ukrainian Foreign Intelligence Service (SZRU) reported on April 23 that Russia’s deficit rose to 4.6 trillion rubles (around $61 billion) in the first quarter of 2026 – well above the planned deficit of 3.8 trillion rubles (around $50 billion) for the whole of 2026.
The Russian central bank in Moscow has again cut its key interest rate.Image: keystone
Borrowing increases by almost 30 percent
Russia’s national debt rose by 21 percent in 2025 and increased by over 65 billion euros (around 60 billion francs), reaching almost 375 billion euros (around 345 billion francs). This emerges from an interim report by the Russian Accounts Chamber, which the Russian business newspaper “Vedomosti” quoted. While the country’s foreign debt fell by 15.4 percent to 48 billion euros (around 44 billion francs), domestic borrowing rose by 29.1 percent to 327 billion euros (around 301 billion francs).
The cost of servicing Russia’s national debt also rose from 5.8 percent of the federal budget in 2024 to 7.5 percent of the federal budget last year, business news channel RBC reported.
Increased income due to high oil prices – but for how long?
In order to improve the revenue situation, Putin increased the VAT from 20 to 22 percent in January. But that in turn drives inflation and shifts the burden onto Russian citizens. According to official data, average prices rose from 4.4 percent in the last quarter of 2025 to 8.7 percent in the first quarter of 2026.
Oil production in Russia: Putin can still sell the raw material well.Image: IMAGO / ITAR-TASS
The Iran war has caused oil prices to rise, which in turn has increased Russia’s revenue. But it is questionable how long this will last. US Treasury Secretary Scott Bessent announced on Friday that he would no longer suspend sanctions against Russian oil.
Ukrainian attacks weaken oil business
Although oil exports are big business for Russia, they pose risks for Putin. “Russian oil exports are extremely vulnerable to disruptions in shipping traffic. “That’s an Achilles heel,” said Janis Kluge, economist at the German Institute for International Politics and Security, to the Washington Post. “If I were Russia, I would be very concerned about developments – both in terms of a stricter policy towards the shadow fleet and the Ukrainian drone attacks on tankers. Because both involve considerable risks. It is crucial for Russia to keep these sea routes open for its oil, otherwise the country will get into serious trouble,” he continued.
A cloud of black smoke in Tuapse, where Ukrainian drones attacked a terminal.Image: IMAGO / SNA
In recent weeks, Ukrainian drones have again hit several Russian oil facilities. In the Russian port city of Tuapse, a terminal burned for days and black rain fell on the city.
But the debt does not only affect the Russian state budget. Budget deficits have been recorded in 73 of the 88 regions that Russia claims as its territory – including five Russian-occupied regions of Ukraine – according to a report by the independent Russian news site Novaya Gazeta. In 2024, only 41 regions reported a deficit, while another 17 reported a budget surplus.
“There remains considerable uncertainty with regard to the external economic environment and financial policy parameters,” says the Russian Central Bank report.
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