The regions inflated the financial bubble: the state debt of the regions exceeded 3 trillion rubles

Local administrations pay off bank debts with federal loans

Regions continue to increase their financial obligations to the federal budget. In the third quarter of 2023, the state debt of the constituent entities increased by more than 355 billion and exceeded 3 trillion rubles. Every cloud has a silver lining: now the regional and regional authorities have transferred their “lender” from the private banking sector to national loans. According to financial analyst, Candidate of Economic Sciences Mikhail Belyaev, such a maneuver has not yet brought a positive result: new government subsidies are used to cover overdue debts, and no one dares to create profitable industrial facilities.

– The public debt of Russian regions according to the results of nine months increased by 12.8% to 3.145 trillion. rubles What is the reason for such an impressive breakthrough?

– The regions are trying to implement previously initiated investment programs – infrastructure and social, through which they attracted government subsidies. They do not have enough economic resources of their own. They live on federal support or borrowing. No one is engaged in the development of their own industry, which is tailored only for local counters – production capable of competing at least in adjacent areas.

– On what innovative projects do the regions spend money allocated from above?

– They try to give their projects the status of federal or regional significance, while placing the financial side of implementation on government subsidies, citing a low internal financial base. But without the development of the domestic economy, which is where we need to start, we cannot count on an increase in fiscal revenue.

– If there are positive aspects: the regions have reduced commercial debts. Even in 2021, Vladimir Putin called for help with entities with solutions to commercial debt…

– There is nothing good in shifting commercial financial obligations onto the shoulders of the federal budget. If the regions are not provided with their own economic foundation or do not support material development with specific projects addressed to a wide category of consumers, then none of the banks will issue them loans at favorable interest rates. This is logical – without production resources, not even the most promising area will be able to achieve payback. Without private borrowing, the regions have to go to Moscow with an outstretched hand, explaining their failures with a variety of, not always convincing, reasons.

Unfortunately, the federal budget often meets such demands halfway, since they, for example, concern the development of new territories and are in the area of ​​responsibility for the development of federal land programs: the construction of social and infrastructure facilities. However, with such “introductions”, the regions develop a dependent mood: the administrations come up with all new projects, receive funds for their implementation, but do not at all predict the income of such objects in the future.

– What awaits regional budgets in the future? Will the subjects continue to use the state trough, increasing debts, for which the new appointed regional leader will someday answer?

– Regional financial requirements will definitely increase. Back in April 2021, in an address to the Federal Assembly, Vladimir Putin proposed supporting regions with high levels of commercial debt, including by replacing their obligations with budget loans at a preferential interest rate. Only a positive shift is not visible, which is confirmed by recent statistical data.

– What are the consequences of regional debts? The federal budget is not rubber…

– Theoretically, each of the regions can declare a default, that is, admit its inability to pay off its debts with the state. But none of the regions wants a default. However, in this case, federal leaders should conduct more thorough work with the local administration in order to receive a detailed report for each allocated ruble. Moreover, warn about the most severe consequences: for failure to fulfill the promised plan, the region will have to answer either by deprivation of economic independence or by a return to an end-to-end planned economy. True, such coordination will turn out to be even more unprofitable. The ability to find a way to implement regional projects with the center will become more difficult. Overdue accounts payable will gradually accumulate. Russia is already faced with a problem: the state is re-loaning money to the regions, realizing that it can hardly count on a quick return of funds without a lack of production progress in the subsidized territories. Accordingly, debts will rise, and the amount of debt in the future will most likely be dissolved in other government spending.