In Russia, regional budget expenditures have increased. Data for 2023 show that local authorities have increased investments in housing and communal services, road construction, education and healthcare. How did this affect the sustainability of regional budgets? Alexander Deryugin, a senior researcher at the Budget Policy Research Laboratory of the Institute of Applied Economic Research (IPEI), came to the conclusion in his study that the debt sustainability of regions “remains at a high level.” Mainly due to high growth rates of regional budget revenues.
THE COUNTRY INCREASES INVESTMENTS
By the end of 2023, budget expenditures of Russian regions (excluding new regions) amounted to 21.8 trillion rubles, an increase of 11.3% compared to 2022. At the same time, the growth rate of expenditures during the year turned out to be uneven: after a sharp jump of 20.1% in the first quarter, in the second and fourth quarters expenditures grew significantly more slowly (+8.4%, +9.4% and +10.3% respectively).
Budget expenditures increased in 75 regions, and in 55 of them growth exceeded inflation. The leaders are Adygea (+33.3%, the largest increase in the areas of housing and communal services, general education and social security), Smolensk region (+23.9%, housing and communal services, road services and healthcare ), Yamalo-Nenets Autonomous Okrug (+22.7, Housing and communal services, culture, social security), Khanty-Mansi Autonomous Okrug – Yugra (+22.2%, national issues, transport, road infrastructure, housing and communal services, social security) and Moscow (+22.2%, national issues, housing and communal services, social security).
Budget expenditures decreased slightly in Ingushetia (-13%), Dagestan (-10.5%), Karachay-Cherkessia (-9.4%), Samara (-9.0%) and Amur (-2.7%) regions.
The budget deficit was observed in 52 out of 85 regions of the country and its total volume amounted to 171.7 billion rubles (against a surplus of 50.6 billion rubles in 2022), or 1% of the total regional budget revenues.
IN AT LEAST A DECADE
“The active provision of budgetary lending for infrastructure from the federal budget in 2023 increased the total volume of public debt of the regions, which as of January 1, 2024 reached 3.2 trillion rubles, an increase of 14.5% year-on-year,” the report notes. – Despite this growth, the level of the debt burden of the regions not only did not increase, but due to the higher growth rates of tax and non-tax revenues of the regions, it even slightly decreased – to 20.5% compared to 20.9% as of January 1, 2022, remaining at the lowest level in the last decade and at a safe level.”
The growth of the national economy had a positive impact on the dynamics of the revenue base of regional and local budgets, due to which the growth rate of budget revenues of consolidated regional budgets by the end of 2023 reached 10.1%, significantly exceeding the inflation rate.
Moreover, after bank loans, whose share in the structure of public debt at the beginning of 2024 reached its historical minimum (4%), the share of government securities began to actively decline, which also fell to its minimum values - 16.8%. And the share of budget loans to regions from the federal budget in 2023 increased from 71.0% to 77.4%.
“IN FAVOUR OF THE LESS AFFILIATED REGIONS”
The expert notes that in the future changes in the size of the debt of the regions and their debt burden will directly depend on the implementation of the presidential address to the Federal Assembly of the Russian Federation in 2024. On the one hand, many of their Provisions provide for a significant increase in the regions’ spending obligations on housing and communal services, social policy and infrastructure development. On the other hand, an important part of the new obligations will be co-financed from the federal budget. In addition, it is planned to gradually write off two-thirds of the accumulated volume of budget loans to the regions (which will amount to 1.2-1.3 trillion rubles). The balance of regional budgets will also be affected by the announced additional adjustment of the tax system, the results of which may affect the receipt of regional budgets’ own revenues, mainly in terms of corporate income tax.
“In general, from the implementation of the measures provided for in the presidential speech, we can expect a significant increase in the volume of financial assistance to the territories, as well as a certain redistribution of income from the most prosperous regions in favor of the least prosperous ones. . some,” summarizes Alexander Deryugin.
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