Putin’s New Bet: Russia Offers Soldiers Debt Relief Up to $95,000 to Boost Recruitment

Russia, grappling with a severe manpower shortage, has introduced a new recruitment incentive by offering to forgive debts of up to approximately $95,000 for soldiers joining the military.

Reuters reported that Russian President Vladimir Putin signed legislation on Saturday which promises debt relief to recruits who sign contracts with the Ministry of Defense for at least a year of service starting December 1. The debt forgiveness, capped at about $95,000, applies to all new recruits who had incurred debts before the law’s implementation.

As the war in Ukraine enters its second year, Russia is resorting to increasingly attractive incentives to boost military enlistment. This strategy allows the country to strengthen its forces without implementing full mobilization, though it significantly raises the national debt.

The increased military spending, without corresponding productivity gains, is fueling inflation concerns. Russia’s Federal State Statistics Service reported inflation nearing 10% in September, with basic food items like potatoes seeing price hikes as high as 73%.

Vladislav Inozemtsev, a prominent Russian economist, noted that enlisting in the military has become a rational economic decision for many in impoverished regions. He pointed out that the families of soldiers who die in combat after a year of service receive compensation that surpasses the lifetime earnings of many civilians in Russia’s poorest areas.

Inozemtsev called this phenomenon “deathnomics,” explaining that for some, dying in battle is seen as a financially advantageous choice, with the added benefit of gaining social status as a “war hero.”

However, this approach carries significant economic repercussions. The research group “Re: Russia” projects that payments to soldiers will account for around 8% of Russia’s total expenditures by June 2024. This puts pressure on inflation and prompts the central bank to raise interest rates to nearly 21%. Additionally, critical industries such as welding, transportation, and construction are experiencing severe labor shortages as more men enlist.

The Wall Street Journal highlighted that military service has become an economically viable option for many in Russia’s poorer inland regions, fundamentally reshaping local economies with these new compensation packages.