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presentation of the Ministry of Finance, prepared for the meeting of the State Duma Committee on Budget and Taxes.
The state debt will grow in the next three years “against the background of the need for regions to finance social obligations,” notes the Finance Ministry. By early 2020, regional debts will amount to RUB2.57 trillion and by early 2021 RUB2.78 trillion.
“We can conclude from the materials received from the Ministry of Finance the current financial condition of the regions does not allow them to fulfill their social obligations in full,” said the head of the committee Andrei Makarov. “The second conclusion is that we do not provide for the appropriate transfer of funds to the regions so that they can fulfill these obligations without increasing the debt burden.”
The budget committee will review the draft law of the Ministry of Finance, which gives the ministry the right to classify regions into three levels of risk based on their debt burden: low (green), medium (yellow) and high (red). The bill proposes to change the system of assessing the debt sustainability of the regions and to revise the current threshold values.
In the "green" regions, the size of public debt does not exceed 50% of total revenues. Excluding grants, debt servicing should cost no more than 13% of revenues and subsidies, and the cost of debt servicing should not exceed 5% of total spending.
For the regions in the red zone, the corresponding threshold values will be 85%, 18% and 8% respectively.
Regions with high debt sustainability will be exempt from the approval of loan and guarantee programs with the Ministry of Finance. The regions from the yellow zone will have to coordinate loan programs, as well as submit a draft of the main debt policy guidelines to the Ministry of Finance. And regions with low debt sustainability from the red zone will be able to borrow only for the purpose of refinancing debt, they will also have to approve and implement a solvency restoration plan agreed with the Ministry of Finance.
According to the Ministry of Finance, 38 regions are in the green zone, among them Moscow and the Moscow Region, St. Petersburg as well as the Leningrad Region, Sakhalin, Tyumen, Lipetsk, Bryansk, Voronezh and Kursk Regions.
The yellow group includes 43 regions, among them the Krasnoyarsk Territory, the Kaliningrad, Tver, Nizhny Novgorod, and Smolensk regions.
The red group contains the Jewish autonomous region, the Oryol region, the Pskov region, and the Republic of Mordovia.
The number of regions whose national debt exceeds their own revenues decreased from seven to two in 2018, said Larisa Eroshkina, director of the department of intergovernmental relations of the Ministry of Finance , in an interview with TASS.
“There are two subjects whose state debt is higher than revenues as of January 1, 2019, is the Republic of Mordovia and the Kostroma region. At the beginning of last year, there were seven such regions, ”said Eroshkina. And if
64 RUSSIA Country Report March 2019 www.intellinews.com