I doubt Russia will run out of money to fund the war in the next year or two, because their government is all in on it being at least partially successful so that they can justify the enormous casualty rates to their population.
That said, they're going to have to take on significant measures to keep funding the war beyond the back half of 2025. They're not raising even close to the amount of money they need when they participate in bond sales to their banks, even when they're offering 16-19% interest rates.
Russia is going to really be left with 3 choices to pay the bills if the war continues through the back half of this year... And mostly likely they'll mix all three strategies, none of which are good for the population.
1. They'll print significant amounts of money to pay the bills, Leading to substantial inflation in Russia, which will hurt their already impoverished population substantially.
2. They'll raise taxes meaningfully, which will again hurt their impoverished population and cause significant angst among the Russian public.
3. They'll cancel planned domestic spending projects such as infrastructure upgrades and redirect those funds to the war effort. That will serve to hurt their populous over the long run.
Inevitably, the war will be exceptionally costly for the Russian people and that doesn't stop at the war casualties they're facing.
Normally to raise funds a government can go to the IMF or World Bank for a loan. Not possible for Russia.
Normally to raise funds a government can sell bonds. Not possible/practical for Russia. I think. What effective interest rate would be required for buyers to be found?
Agreed, printing money would lead to even higher inflation. Throwing existing money at everyone involved in the war resulted in no more consumable goods being produced (probably less, I guess) but consumers having more money to spend. Inflationary.
Raising taxes on consumers handed all this money by the government (sign up payments for soldiers, excessively high salaries for soldiers, death/injury compensation payments, inflated salaries in general due to labour shortage) would be an idea. Non-war related business is seeing reduced profits, so the tax available from company profits should be falling.
I suspect that large amounts of money intended for maintaining the national infrastructure (roads, railways, hospitals, schools etc) will have already been diverted to financing the war. For example, I recall reports of funds intended for maintenance/improvement of infrastructure of towns in Siberia being diverted to rebuilding Mariopol in Ukraine.
The position is absurd: the government's actions increase inflation while the central bank is acting to decrease inflation. Business is being badly hit with many predicted to be forced into bankruptcy by the 21% base rate. Of course, banks lend at a higher rate than base rate. If a business borrowed at 8% base rate + 5% in 2023 (13% interest total) it would now be paying 21% + 5% (26% interest total) on those borrowings. That could bring a lot of businesses down.
I do not see how Russia will be able to pay soldiers and all other people employed by the state, arms manufacturers and other companies supplying the state with goods and services when the wealth fund runs dry, I think probably in the next few months.
The rumour that deposits in citizens' bank accounts may soon be frozen seems less and less implausible to me.
