The Kremlin Is Financing the War Through Hidden Money Emission — Intelligence

02.08.2026, 20:44 uatv.ua

The Kremlin is increasingly financing the war through hidden money emission. This is according to Ukraine’s Foreign Intelligence Service (FISU), UATV English reports.

“Since the Russian government can no longer raise the funds it needs on the market, it’s forcing state banks to buy federal loan bonds, with the central bank providing the liquidity for this. Formally, this is a bond placement, but in reality it’s the use of the banking system as a channel for creating new money,” intelligence notes.

FISU explained the mechanism: Russia’s Finance Ministry issues debt securities, state banks buy them, and the central bank backs it with additional resources.

“As a result, the national debt becomes a tool of indirect money emission. The budget gets funding, but at the cost of the economy’s dependence on printing rubles and rising inflation risks. For this, Russia’s Finance Ministry registered two new floating-rate bond issues: one worth $6.4 billion maturing in 2037, and another worth $12.8 billion maturing in 2042,” intelligence indicates.

According to it, as of July 1, Russian banks already held $248.1 billion worth of government bonds, or about 9% of the banking sector’s assets. Their portfolio grew by another $6.5 billion since the start of the year.

“The reason for this step is the rapidly growing budget deficit. In the first half of 2026, it reached almost $77 billion, with military spending remaining the main factor. Additional war spending could exceed the plan by another $51.3–64.1 billion, part of which the Kremlin wants to cover with new borrowing,” FISU reported, noting that, according to the Russian central bank’s forecast, the annual deficit could grow to $105.1 billion.

At the same time, the market, as noted, is no longer willing to finance the Russian budget on the government’s terms.

“Due to high rates and weak demand, the Finance Ministry cannot raise the necessary sums at an acceptable price. In June and July, the ministry canceled at least three bond auctions because investors demanded higher yields,” intelligence notes.

The shift to forcibly mobilizing state banks’ resources doesn’t solve the deficit problem, but merely conceals it, FISU stresses.

“This model increases the budget’s dependence on the central bank, concentrates debt within the banking system, and intensifies inflationary pressure. In effect, the Kremlin is increasingly financing the war using emission-based resources rather than market money,” intelligence stated.

As previously reported, Ukraine’s Presidential Commissioner for Sanctions Policy Vladyslav Vlasiuk stated that Russia’s domestic national debt has grown to 32.4 trillion rubles, and government bond yields have approached 16%, indicating a liquidity shortage and growing risks for the Russian economy. International sanctions have deprived the aggressor of access to external borrowing.

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