Russian Finance Minister warns of regional budgets' strains, rising debt

The combined deficit of Russian regional budgets will grow by 27% to 1.9 trillion roubles ($25.4 billion) in 2026, largely due to ​lower revenues from the corporate profit tax and higher social spending, ‌while the regional debt is rising, Finance Minister Anton Siluanov warned on Monday.

The regional budgets bear a significant share of spending linked to the war in Ukraine, ​such as payouts to war volunteers and their families.

Russian officials tout ​the federal budget's relatively moderate deficit and debt, backed by ⁠the fiscal reserve National Wealth Fund, as a key buffer against Western ​sanctions. However, a broader measure that includes regional balances shows a weaker ​picture.

Profit tax revenues, which account for up to one-third of total regional budget income, have been hit by Russia's economic slowdown, which started in 2025. According to the ​latest available data for January, corporate profits fell by almost 30% year-on-year, ​as many companies report lower profits or losses.

"The situation with the regions' budgets is ‌challenging," ⁠Siluanov told a hearing at the Federation Council upper house of parliament. He stressed that the biggest deficits arose in regions that had traditionally been running budget surpluses.

Siluanov said that the regions' debt as a share of ​revenues grew by ​one percentage point ⁠to 19% in 2025, as the regions were financing their deficits with bank loans at current high interest ​rates.

"Our task is to minimize commercial debt. Today, it ​is costly," ⁠he said.

Siluanov said that the Finance Ministry was working with regional authorities to cut spending and raise revenues, aiming to cut the expected combined deficit ⁠by almost ​half to 1 trillion roubles. He described ​up to 20 regions, or over one-fifth of all Russian regions, as problematic, without naming ​them. ($1 = 74.9000 roubles)

-Reuters