reports that the Russian Ministry of Finance prepared a proposal for the 2016 budget that involves an apparent increase of military expenditures. Regardless of the budget shortfall of 374.5 billion rubles (USD 6 billion), the Ministry proposes to increase the expenditures by approximately 300 billion rubles (USD 4.8 billion) to 16.4 trillion rubles (USD 262 billion), increasing the deficit to 3.66% of the GDP. As the Ministry plans to cut practically all “civilian” expenditures to offset the shortfall, this will free up a total of 678.8 billion rubles (USD 10.9 billion). The beneficiaries of this balance are not known, but as they are listed in a confidential annex not open to the public, it is very likely that they are related to defense and/or law enforcement.

As usual, some programs and regions will be impacted by the changes to the federal budget more than others, but it is interesting to note that the sequestration will affect even Crimea, as the program for the socio-economic development of the annexed peninsula will be cut by 15.6%.

Amendments to the federal budget management process also seem to be under way and should enable the Minister of Finance to reallocate up to 10% of all expenditures to military and security institutions without consultations with the Government or the Parliament.

The Ministry of Finance refused to comment on either of the proposed changes.