Putin Orders Government to Shore Up Russia’s Debt-Laden Regions
The order comes as the federal government struggles to fill its own budget shortfall, which has reached 6.5 trillion rubles ($77.4 billion).
Russian President Vladimir Putin has instructed the government to stabilize the finances of financially troubled regions, as these areas collectively face a budget deficit of 1.9 trillion rubles ($22.6 billion) this year. The federal government's own budget shortfall has reached 6.5 trillion rubles ($77.4 billion). President Putin emphasized that regional financial stability is directly the responsibility of the federal government and the Finance Ministry.
The regions owe a combined total of 3.3 trillion rubles ($39.3 billion), accounting for approximately 17% of their own revenue. Around two-thirds of this debt results from low-interest federal loans, with the remainder borrowed in the open market at higher interest rates. In response to the financial crisis, the government has taken measures such as forgiving some of the regions' federal loans to postpone repayment.
This has reduced their combined debt by 115 billion rubles ($1.4 billion) and provided regions up to two-thirds of their federal loan forgiveness. The government has postponed repayment of around 100 billion rubles in loans until 2030 and plans similar delays for future years.
This debt forgiveness has allowed regions to allocate an additional 300 billion rubles ($3.6 billion) over three years, although much of this money is being spent on supporting Russia's war in Ukraine. Regions have also been paying significant signing bonuses to attract soldiers to the military, with the average bonus rising by 30% to between 1.8 million and 1.9 million rubles ($21,400-$22,600) over the past year.
As a result, 93,000 people signed military contracts in the second quarter, leading to a total cost of around 167 billion rubles ($2 billion) for signing bonuses.
Regional spending on national security has gone up by 36% year-on-year, while housing and utilities spending has also seen strong growth, rising by 17%. However, spending on the economy and health care has decreased, and interest payments have doubled. The regions primarily rely on corporate profit tax and personal income tax for income, with personal income tax receipts increasing by 14.9% in the first quarter, while corporate profit tax revenue fell by 11.8%.
Economic analyst Vyacheslav Shiryaev has described these debt write-offs as a form of hidden default, as the regions cannot repay their debts, and the federal government forgives the debt instead.
Written by urgent.news from The Moscow Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
