Russian President Vladimir Putin doubled upfront payments for volunteers to fight in Ukraine on Wednesday, a move aimed at facilitating military recruitment but likely to create imbalances in the overheated economy.

All Russians who sign a contract with the army will now receive an upfront payment of 400,000 roubles ($4,651). The decree also recommends that regional authorities match this payment from their budgets with at least the same amount.

With the minimum monthly payment for a private participating in what Russia calls a "special military operation" set at 204,000 roubles, the new decree raises the minimum annual wage in the first year of service to 3.25 million roubles ($37,791).

Monthly wages for officers are higher and depend on their rank. All recruits also receive additional money for participating in offensives or destroying enemy tanks and other machinery.

Earlier this month, the mayor of Moscow set an upfront payment for city residents signing up to fight in Ukraine at 1.9 million roubles ($21,777) from the city budget, bringing their annual pay in their first year of service to 5.2 million roubles.

The latest increases mean that the minimum annual pay for Russian contract soldiers fighting in Ukraine will exceed the average wage in Russia by more than threefold, with the minimum pay for Muscovites exceeding the average wage by more than fivefold.

Such payments have helped Russia avoid a new nationwide mobilization after a troubled campaign in 2022 led to a mass exodus of people to neighbouring countries. However, some economists argue that the payments are creating a wage spiral in the economy.

The wage increases are also supported by an array of other measures, such as exemptions on monthly interest payments on consumer loans for volunteers and state guarantees on such loans in the case of death.

These measures have been encouraging would-be volunteers to take consumer loans and have contributed to continued growth in consumer lending, despite the central bank hiking its key interest rate to cool the economy.

Russian officials say about 190,000 people have volunteered so far this year to fight in Ukraine, compared with 490,000 contracts signed in 2023.