Russian Finance Minister Flags Rising Regional Deficits and Mounting Debt
Overview of Russia's Regional Budget Challenges
MOSCOW, April 27 (Reuters) - The combined deficit of Russian regional budgets will grow by 27% to 1.9 trillion roubles ($25.4 billion) in 2026, largely due to lower revenues from the corporate profit tax and higher social spending, while the regional debt is rising, Finance Minister Anton Siluanov warned on Monday.
Impact of War-Related Spending
The regional budgets bear a significant share of spending linked to the war in Ukraine, such as payouts to war volunteers and their families.
Federal vs. Regional Fiscal Health
Russian officials tout the federal budget's relatively moderate deficit and debt, backed by the fiscal reserve National Wealth Fund, as a key buffer against Western sanctions. However, a broader measure that includes regional balances shows a weaker picture.
Declining Profit Tax Revenues
Profit tax revenues, which account for up to one-third of total regional budget income, have been hit by Russia's economic slowdown, which started in 2025. According to the latest available data for January, corporate profits fell by almost 30% year-on-year, as many companies report lower profits or losses.
Statements from Finance Minister Siluanov
"The situation with the regions' budgets is challenging," Siluanov told a hearing at the Federation Council upper house of parliament. He stressed that the biggest deficits arose in regions that had traditionally been running budget surpluses.
Rising Regional Debt Levels
Siluanov said that the regions' debt as a share of revenues grew by one percentage point to 19% in 2025, as the regions were financing their deficits with bank loans at current high interest rates.
Efforts to Minimize Commercial Debt
"Our task is to minimize commercial debt. Today, it is costly," he said.
Ministry's Response and Problematic Regions
Siluanov said that the Finance Ministry was working with regional authorities to cut spending and raise revenues, aiming to cut the expected combined deficit by almost half to 1 trillion roubles. He described up to 20 regions, or over one-fifth of all Russian regions, as problematic, without naming them.($1 = 74.9000 roubles)
Reporting Credits
(Reporting by Darya Korsunskaya; Writing by Gleb BryanskiEditing by Keith Weir)
