Page 73 - RusRPTNov20

bomb of regional debt​, which has been growing at an alarming rate between 2015 and 2016.
The federal government was also short of cash as it struggled to​ ​RUB2 trillion hole in the budget​ for which it didn't have the money. MinFin cut back harshly on federal transfers to the regions from the centre and eventually only just managed to bail the budget out with the “privatisation” of a 19% stake of Rosneft that later turned out to be a loan from the UAE.
MinFin then imposed a “​manual mode​” system of control over regional debt and allocated them three colours: red, yellow and green. Green regions were the vast majority and allowed to handle their own debt management; yellow regions had to check their plans with the ministry; and Ministry simply took over debt management completely in the half a dozen red regions. In the worst cases these regions entire income would have to have been dedicated to debt service and they banned from borrowing completely.
As the pressure eased on the federal budget as an economic recovery got under way in 2017 and the Ministries own reforms started to pay off, implemented by now Prime Minister Mikhail Mishustin who was head of the tax service then, the regions were switched from expensive bank loans to soft credits from the central government. But that also made them more dependent on the federal government too, says Toth-Czifra.
Net regional debt began to fall over next few years and debt servicing became manageable. Some regions even managed to amass some reserves. Regional finances also got the IT make over that was so effective at the tax service and, as ​bne IntelliNews​ reported,​ ​Russia’s leading software company IBS has been putting regional bookkeeping into the cloud​ to allow for much more efficient “just-in-time” financing of local budget expenses.
73 ​RUSSIA Country Report​ November 2020 www.intellinews.com