Page 55 - bne IntelliNews monthly country report Russia February 2024

December 18 would automatically lead to these regions losing the grants, which would make it impossible for them to execute their budgets.
The four regions—Chechnya, Dagestan, Ingushetia, and Tuva—receive 134.8 billion rubles ($1.5 billion) between them. That is more than 20% of all of the grants allocated to 67 Russian regions in the 2024 budget. (Chechnya’s grants are widely seen as a means to buy the loyalty of the region’s head, Ramzan Kadyrov.) Allocations for the four Russian-occupied regions of Ukraine are even higher than this, not including additional subsidies they receive from regional budgets and state-adjacent companies active in the territories. Reconstruction of the occupied territories has been prioritized by the Kremlin even over domestic development projects. It is therefore unlikely that the Finance Ministry would seriously consider cutting subsidies, or that the heads of the affected regions would refuse to sign the new agreements. Most likely, the Finance Ministry is sending a signal that now is not the time for federal largesse, and that the authorities will take a dim view of excesses and major spending decisions that were not agreed upon with the federal government. Sure enough, shortly after, Kadyrov announced that 3,000 additional Chechen fighters were ready to join the frontlines in Ukraine.
Meanwhile, representatives of 38 regions participated in a conference on regional finances organized by the Moscow State Institute of International Relations this week. Several regional representatives highlighted that in order for regions to play a larger role in infrastructure development—as the federal government expects them to—they will need help. Alexey Teksler, the Governor of the Chelyabinsk Region and head of the State Council Commission on Economics and Finance, suggested encouraging banks to invest more. Other suggestions included the possibility of issuing digital rubles and setting up dedicated management companies to channel more money to regions, as well as the evergreen proposal that large companies relocate their HQs to (and therefore pay more corporate income taxes in) depressed regions. This would be inconvenient for the companies because regional cities are not actual decision-making centers. The main, but unspoken, takeaway from the conference was that the war simultaneously puts more of a burden on regional finances while making it difficult for the federal budget to increase their financial support.
Regions continued adopting their 2024 budgets in early December. While there are no overarching figures available yet, several major regions expect to run deficits next year—expenditures on housing, social aid and public investments are expected to grow. Based on the most recent data on the (aggregate) execution of regional budgets as of October, regional incomes have grown adequately this year. Revenues from profit taxes are 21% higher and personal income tax receipts are 13% higher y-o-y, even though transfers from the federal budget have only grown by 8% (only slightly above inflation). The growing incomes mostly reflect the effects of state-driven economic stimuli: inflation and—to a certain extent—growing oil prices. Planned deficits
55 RUSSIA Country Report February 2024 www.intellinews.com