Disaster in the regions: there is no money and never will


Катастрофа в регионах: денег нет и не будет

Without waiting for the start of the program of restructuring of loans, regions have begun to ask the government for financial assistance. Khakassia relies on 28.2 billion rubles to pay off their debts, Karelia announced the lack of 783 million roubles for increase of salaries to state employees, Sakhalin oblast blackmailing the termination of the 25 government programs, hoping to compensation for the redistribution of tax revenues. Experts expect new cries for help. But all no money.

The regions did not wait for the restructuring and has started to ask the center about urgent financial assistance. Last week was made by the press service of the Supreme Council of Khakassia. On her website she published an appeal of the Republican authorities to the Prime Minister Dmitry Medvedev and state Duma speaker Vyacheslav Volodin with the request to allocate to 28.2 billion rubles. Khakassia is required 17.9 billion roubles for the repayment of commercial loans and $ 4.3 billion not enough to pay off overdue accounts payable.

The region urgently needs financial assistance, “as currently in the Republic of Khakassia there was a catastrophic situation,” reads the statement of the government of Khakassia.

The losses of the budget of the Republic occurred “from-for negative tendencies in the economy of the past and adopted in recent years at the Federal level solutions in the field of inter-budgetary relations and tax regulation”. In particular, more than 10 billion rubles, the Republic lost because of tax reforms: the abolition of sales tax, tax on road users, revenues from excise on alcohol products.

Previously for support to the Federal centre was visited Karelia. Region were asked to allocate money to have enough resources for the performance of “may decrees” of Vladimir Putin about increase of salaries to state employees. As noted in the Ministry of Finance of the region, in Karelia lacks 783 million rubles on performance targets for the remuneration of teachers, doctors, cultural workers.

Close to ask for money from the center in the Perm region. The Governor of the Perm edge Maxim Reshetnikov, who became officially the head of the region only in September, on the air of RBC noted with regret that “subsidies for the Perm region more than halved”, adding to the annual “creative” in intergovernmental relations.

The next Mordovia

“In the budgets of many Russian regions there was a structural imbalance. In Khakassia in 2016, the deficit before debt amounted to 33% of all revenues. The situation in the Republic of Khakassia amazing because decreased budget revenues, in particular, due to innovations in the field of taxation,” commented Fitch Ratings analyst Konstantin anglichanov.

Also increased budget expenditures, including for the may presidential decrees. The imbalance of budget increases is not the first year.

“Each region has its own history with the identified challenges, however, Karelia and Khakassia are similar in the sense that most of the budget was replenished with taxes it. If the regions talking about it, so, the situation reached an extreme point. Khakassia is necessary to give the market credit, and to repay the bonds,” says Brits.

The expert suggests that similar problems may also occur in other regions – for example, Kirov region and Republic of Mordovia.

However, the difficult situation now is not only them.

As of September 1, 2017, the amount of debt on budgetary credits attracted actors from other budgets of the budgetary system of the Russian Federation has grown from the beginning of the year to 103 billion rubles, or by 10.4% and amounted to 1.1 trillion rubles, said in the conclusion to the draft of the Federal budget made by the budget Committee of the state Duma.

Thanks to last year’s substitution of commercial loans budget loans, this debt decreased to 550,2 billion. However, in 14 regions there was an increase in commercial debt. So in Kabardino-Balkaria it increased 2.3 times in the Volgograd region – in 1,9 times, the Republic of Mordovia – 1.7 times, Astrakhan, and Orel regions by 1.5 times. Debts of the Republic of Khakassia and the Kemerovo region has grown 1.2 times, according to the materials of the Duma Committee on budget and taxes.

Prolong the agony

Exacerbated the situation in the regions is the desire of the Ministry of Finance to reduce the budget deficit in the regions. So, in the office of Anton Siluanov became strictly monitor the implementation of regional agreements with the Ministry. In particular, in the first half of this year, the regions have returned to the office of Anton Siluanov of more than 80 billion roubles of budgetary credits. As we found out “Газете.Ru” this is due to violations of the obligations to the Finance Ministry.

In recent years, the volume of aid to regions from the Federal budget steadily reduced, and the transfer policy of the Federal centre as a whole has undergone major changes.

In the crisis year of 2009 the share of revenues of regional budgets transfers exceeded 25%, and in the crisis period 2015-2016, it dropped from 18.8% in 2014 to 15.9% in 2016, stated in the conclusion on the budget prepared by the Higher school of Economics (HSE).

In addition to absolute and relative reduction of transfers the Federal government has tightened the conditions for their provision, that “significantly restricts the economic independence of the regions”, says the HSE. From 2017, the provision of grants for leveling the budget provision was due to the performance of a number of obligations are not fully dependent on the subject. For example, one of them is the growth of tax and non-tax revenues compared to the previous year in comparable conditions. In case of default by the subject of the Russian Federation of the commitments, subsidies for leveling the budget supply in the next three years can be reduced compared with the planned level by 5%.

According to experts HSE regions should provide more tax rights to compensate for the loss of income.

Instead, the government is proposing other measures.

In 2018, the regions are waiting for support for the restructuring of loans. Russian President Vladimir Putin personally promised attractive conditions for loan restructuring.

“In the first two years of the program — the most favorable terms, regions will need to pay only 5% of the debt annually. The subjects thus freed money, there are additional resources to address socio-economic challenges, to solve problems associated with the creation of new jobs, to improve the quality of life of citizens”, – said the President at the meeting of the state Council in late September.

However, the Ministry of Finance has adjusted the terms of the restructuring program. According to the Minister of Finance Anton Siluanov: regions should, in particular, to reduce the borrowing market loans to 50% of its income by 1 January 2020 and not keep the budget funds of the subject in Bank deposits longer than one month.

In the government of Astrakhan region “Газете.Ru” talked about the fact that, under the proposed restructuring program, the region should return to the Federal budget in 2018 0.6 billion rubles is provided under the schedule of repayment of 2.3 billion rubles. “Thus, the budget freed up financial resources of more than 1.7 billion rubles, which can be aimed at solving social problems”, – noted in the region.

As stated on Friday, the Chairman of the Duma Committee on budget and taxes Andrey Makarov, the combined effect for all regions of restructuring loans only in 2018 and 2019 will amount to 430 billion rubles. The total debt of the regions is more than 2 trillion rubles.

So the restructuring will save the regions rather prolong the agony.

It will reduce the level of current debt burden, freeing funds for development, but if the region cannot implement development programs and to provide a favourable investment climate, this money will simply be “eaten”, and debt problems will not disappear and will emerge after some time, said Deputy General Director IK “Finam” Yaroslav Kabakov.

Who will help the Ministry of Finance

The expert suggests that in the near future, the government may obtain the request for financial assistance and from other regions.

According to Yaroslav Kabakov, much will depend on how the story would end with a request for assistance of the authorities of Khakassia. “The situation is ambivalent: the Federal government was in a difficult situation. On the one hand, you can not help: this can be interpreted as moral hazard, encouraging unscrupulous behavior and could lead to an avalanche of requests from other regions. On the other hand, the main cause of the dire situation of many regions is connected with their center task performance “may decrees”, so with high probability we can expect that to be adopted a “middle” option, like this: to give the Republic some extra help, albeit in a smaller amount requested, but at the same time to punish the local management”, – says the expert.

The interviewed representatives of the regions failed to promptly provide the answers.

While the Federal government trying to solve problems in specific regions individually.

The Finance Ministry said that “aware of the situation with the budget of Khakassia”. And “the question of improving the balance of regional budgets worked out”, – vaguely replied in the Ministry.

However, the capabilities of the Ministry of Finance are also limited to solve all the problems of the regions “individually” Minister Anton Siluanov not.

Also individually, for example, is now resolved and the conflict between the Sakhalin region and the Federal government that occurred in September 2017. The government in the draft Federal budget for 2018-2020 redistributed tax revenues in the region from SRP-the project “Sakhalin-2” in favor of the Federal center.

In response, Sakhalin protested the project of the Federal budget in the state Duma and threatened to stop funding 25 state programs. Price dispute valued at 36.6 billion rubles, RBC reports with reference to sources in the government, Deputy Prime Minister and presidential envoy to FEFD Yuri Trutnev have agreed with the region on compensation of lost income at the expense of budget subsidies.

As follows from the materials to the budget, while between subjects allocated 1.2 trillion rubles, or 74% of the total, is planned at 1.7 trillion rubles.

That is, the government has the ability to distribute another 500 billion rubles, without changing the structure of the Federal budget, already approved by the Parliament on 27 October. In these conditions we could win those regions which will be the first to declare about their problems.

The problems of the other will already be beyond the budgetary possibilities. So support from the Ministry of Finance will be able to receive only the most efficient regions, which will ask it first.

Of course, if they decide to do so, because they could severely punish.

“Many regions are now ready to ask for help, but they’re just afraid to do it publicly: you can easily get back tough sanctions from the government. But the patience of the Federation ends: revenues are falling, the economy is not growing, the Ministry of Finance maintains strict budgetary policy and takes away tax revenue when it counts, as it was last year with a 1% tax on profits”, – says the Deputy of the state Duma from the Irkutsk region Mikhail Chupov.


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