By Darya Korsunskaya
MOSCOW, Oct 19 (Reuters) - Russian President Vladimir Putin promoted Finance Minister Anton Siluanov in a surprise cabinet reshuffle on Monday aimed at maintaining macroeconomic stability and fiscal discipline as the budget deficit and spending on the war in Ukraine grow.
The Kremlin said Siluanov, a career bureaucrat who has been finance minister since 2011, will also become deputy prime minister, while his current deputy, Irina Okladnikova, will take over as the government's chief of staff.
The move comes as Russia confronts mounting strains on public finances after more than four years of war in Ukraine.
A revised budget currently before parliament envisages defence spending in 2027 around 27% higher than originally planned, taking military expenditure to its highest level since the invasion of Ukraine in 2022.
The government has also doubled its forecast for the 2026 budget deficit to 3.2% of gross domestic product from 1.6%. Budget spending in 2026 will increase by 13.2% to 48.6 trillion roubles ($587 billion), or 20.9% of GDP.
"You understand the period our economy is going through, and the task of continuing to ensure macroeconomic stability further increases the importance of the Finance Ministry. This includes budget discipline," Kremlin spokesman Dmitry Peskov said, briefing reporters.
Government spokesman Boris Belyakov said maintaining financial stability and a balanced budget was becoming increasingly important amid growing external pressure.
Russia is planning tax hikes and spending cuts next year to keep up with rising military spending, which remains a top Kremlin priority. Analysts said Siluanov's promotion suggests the government wants tighter control over spending decisions.
"The main issue today is control over spending. Even the strongest finance minister would find it difficult to tackle such a task without additional powers," said economist Sergei Aleksashenko, who held senior positions at the Finance Ministry and the central bank in the 1990s.
CONSERVATIVE APPROACH
Siluanov, who has spent his entire career at the Finance Ministry, in 2011 replaced his mentor Alexei Kudrin, one of the architects of Putin's economic reforms in the early 2000s. He is seen as a conservative technocrat.
"Markets know Anton Siluanov for his consistent and moderately conservative approach to economic policy," said T-Investments' chief economist Sofya Donets.
Siluanov's international standing has been dented by the war in Ukraine, with many delegates to the International Monetary Fund's steering committee walking out of a meeting in Bangkok on October 17 when he addressed the group in Russian.
The reshuffle follows September's parliamentary election and comes as Russia searches for new sources of economic growth while grappling with high interest rates, rising taxes and the growing costs of the war.
In other changes, Transport Minister Andrei Nikitin was also nominated to become a deputy prime minister. All other key officials, including Foreign Minister Sergei Lavrov and Defence Minister Andrei Belousov, retained their posts.
Aleksashenko said the changes implied a weakening of Prime Minister Mikhail Mishustin, who lost one of his key allies, former chief of staff Dmitry Grigorenko, in the reshuffle.
($1 = 82.7455 roubles)
(Writing by Gleb BryanskiEditing by Ros Russell)
