Page 138 - RusRPTAug24

6.1.4 Budget dynamics - regions
President Putin signed a law that will allow the government to write off debts of regions towards the federal government. According to the law, the government has the right to write off or restructure debts “from state extra-budgetary funds” as well as tax benefits “within the framework of investment projects for the development of the tourism sector.” The exact methodology will be determined by the federal government. The law essentially extends the federal government’s debt replacement policy from the past years, through which the Finance Ministry replaced loans from the market with significantly cheaper budgetary loans, thus reducing the debt burden of regions. As of 2023, however, this policy had run its course, with more than 77% of regional debt held by the government. Thus, in February, Putin promised to forgive two-thirds of accumulated budgetary loans. The total amount of these is 2.5 trillion rubles ($28.5bn) according to the Finance Ministry, of which 1.6 trillion ($18.2bn) will be restructured, saving regions an estimated 200bn rubles ($2.3bn) annually in the next three years. In accordance with the increasingly strict supervision of regional budgets, the federal government will likely require regions to put these savings towards specific priorities established by the Kremlin. Debt restructuring is the latest in a series of measures to put the finances of regional governments and municipalities on more stable footing.
Russia’s economic growth in 2023, fueled by defense orders, meant that
138 RUSSIA Country Report August 2024 www.intellinews.com