Record Savings in Russian Regions, yet Budget Deficits Persist
Regions' reserves used to meet their debt obligations
In a recent analysis, experts at Expert RA reveal that accumulated balances across Russian regions have reached their highest level in the past eight years, surpassing the previous record of 2.8 trillion rubles set in 2023. However, this increase does not fully compensate for the 42.6% of regional balances that are accounted for by the capital, as these funds decreased from 2 trillion rubles to 1.6 trillion rubles over the course of the year.
The primary cause of this decrease is attributed to regional budget deficits. Analysts note that more than half of the 58 Russian regions saw a decrease in their balances on accounts and deposits, due to the allocation of a significant portion of these funds for debt repayment.
The ratio of the amount of balances to the approved 2025 expenses for all regional budgets stands at 12.6%. Although this figure is lower compared to last year's 13.1%, Expert RA predicts that regions have planned a 7% increase in spending for 2025, which could lead to decreased balances by the beginning of 2026. The agency anticipates that the volume of balances at this time may drop to 2.1 trillion rubles if regions implement plans to cover 40% of their deficit using remaining funds.
Notably, the Nenets Autonomous Okrug saved one-third of its planned 2025 expenses in 2024, placing it at the top of this indicator. Other regions, such as Leningrad and Smolensk, are also among the top savers. However, a high ratio of balances to planned expenses does not equate to a "reserve of strength," as some regions may exhaust their balances while others maintain them for future use.
Fifty-four regions have balances that account for less than 10% of their planned 2025 expenses, with ten subjects having a ratio of balances to planned expenses of 0.1% or less. These regions usually have accumulated funds that do not exceed several hundred or even tens of millions of rubles.
In positive news, regions have also experienced a record 595.9 billion rubles in revenue from cash management, according to Expert RA. This revenue increase has been partially driven by the high key rate environment. However, nearly all of the income was generated by the nine Russian subjects with high budgetary autonomy.
Analysts believe that regions with less than 20% of inter-budgetary transfers in their budgets can allocate their remaining funds to deposits. This designation applies to regions such as Moscow, St. Petersburg, Leningrad, Sverdlovsk, and Sakhalin, as well as Krasnoyarsk Krai, Yamalo-Nenets Autonomous Okrug, Perm Krai, and Tatarstan.
Improving the medium-term budget stability of regions can be achieved through a combination of legislation, effective debt management, and revenue-generating initiatives. This may involve diversifying revenue streams, implementing tax reforms, granting regional autonomy, restructuring debt, encouraging public-private partnerships (PPPs), ensuring transparent budgeting, developing tourism infrastructure, supporting agricultural development, and fostering the digital economy. These measures can help regions diversify their revenue sources, manage debt effectively, and leverage new economic opportunities to improve their budget stability.
In the analysis conducted by Expert RA, it was noted that regional budget deficits persist despite a record high level of accumulated balances in Russian regions. This is partially due to the fact that more than half of the regions saw a decrease in their balances on accounts and deposits, with the funds being allocation for debt repayment.
For regions aiming to improve their medium-term budget stability, analysts suggest a combination of measures such as diversifying revenue sources, implementing tax reforms, granting regional autonomy, restructuring debt, encouraging public-private partnerships (PPPs), ensuring transparent budgeting, developing tourism infrastructure, supporting agricultural development, and fostering the digital economy. These measures can help regions diversify their revenue sources, manage debt effectively, and leverage new economic opportunities to improve their budget stability, which is essential for personal-finance management and business growth.
