Rising inflation may undermine Kremlin's high military expenditure, UK intelligence says
www.pravda.com.ua
Sat, 12 Apr 2025 13:52:00 +0300
UK Defence Intelligence has analysed the state of the Russian economy in terms of maintaining high defence spending.
Source UK Defence Intelligence update dated 12 April on X Twitter, as reported by European Pravda Details UK intelligence noted that on 21 March 2025, the Central Bank of Russia CBR decided to keep its key interest rate at 21.
Interest rates are now at their highest level in 20 years, compared to the prewar level of 8.5 in January 2022.
While interest rates remain high, the number of corporate bankruptcies will highly likely increase in Russia, the update said.
In November 2024, the rouble fell to its lowest level since Russia invaded Ukraine in 2022, reaching RUB 114 to US1.
By March 2025, it had recovered to a high of RUB 81 to US1.
The appreciation of the rouble will highly likely reduce federal revenues from oil and gas, in rouble terms, increasing pressures on the federal deficit, UK intelligence added.
However, inflation has continued to rise despite the strengthening of the rouble, climbing to 10.1 in February 2025 from 8.5 in October 2024, when the key interest rate was raised to 21.
Labour shortages, alongside high levels of government spending, almost certainly mean inflation will remain above the CBRs target of 4 per cent through 2025.
Long term inflationary pressure will highly likely exacerbate pressures on Russias ability to sustain high defence spending, the update says.
Background A previous UK Defence Intelligence update noted that the advance of Russian occupation forces in Ukraine has slowed since the beginning of 2025, with the number of attacks decreasing.
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