Putin Orders Government to Help Russia's Debt-Laden Regions

Russian President Vladimir Putin has instructed the government to address financial troubles in the country's regions, whose combined budget deficit has reached roughly 1.9 trillion rubles ($22.6 billion) this year. Speaking at a meeting with senior officials, Putin said maintaining stable regional finances is a direct responsibility of the federal government and the Finance Ministry.

Finance Minister Anton Siluanov said regions collectively owe 3.3 trillion rubles ($39.3 billion), about 17% of their own revenue. Roughly two-thirds of that debt comes from low-interest federal loans, while the rest was borrowed on the market at much higher rates.

Putin ordered 100 billion rubles ($1.2 billion) be allocated to the regions in the worst financial shape. But with the federal budget itself stretched thin, Moscow's main tool for helping regions has been forgiving portions of their federal loans or extending repayment deadlines. Since the start of the year, the government has written off 518 billion rubles ($6.2 billion) owed by 76 regions, cutting their combined debt by 115 billion rubles.

Regions can have up to two-thirds of their federal debt forgiven, with repayment of the remainder delayed. Roughly 100 billion rubles due this year has been pushed back to 2030, and a third of loans due between 2027 and 2029 will be postponed to 2031-2033. Siluanov said these delays would free up nearly 300 billion rubles for regional spending over three years.

Much of the relief goes to the war effort

Siluanov said regions spent more than 300 billion rubles of their forgiven debt on support for military families and other costs tied to the war in Ukraine. Regions are also responsible for large signing bonuses to attract soldiers. Researcher Janis Kluge estimated the average bonus has risen 30% over the past year, to between 1.8 and 1.9 million rubles, with around 93,000 people signing military contracts in the second quarter alone.

Regional spending on national security rose 36% year-on-year between January and April, while spending on the economy and health care fell and interest payments more than doubled. Economist Vyacheslav Shiryaev described the debt write-offs as a form of hidden default, saying regions simply cannot repay what they owe, so Moscow forgives it instead.