At Vladimir Putin’s annual press conference in December, the President “…said that according to the rules of the government and the Ministry of Finance that a region’s debt should not be more than 50% of its own revenue. At present, five Russian regions have already crossed this threshold. Is the situation serious?”
Rosbalt talked to Professor Natalia Zubarevich from the Independent Institute of Social Policy about the situation.
“Putin said nothing new. The situation in the regions is not worse in comparison with the previous year, they did not increase debt. Between January and early October 2016, it even declined slightly. But in different parts of the country it is a different story, so that the total numbers never reflect the situation in each region.”
Additionally, she continues, “two-thirds of the regions in 2015 had a budget deficit… larger than half of their own revenues. That is, income less the money that they get from the federal government.”
Zubarevich rejects the idea that the regions can default because they are “not a company.”
There are other options, however.
“If they are low cost loans, and many are, then, firstly, it is virtually free money – with a one percent annual rate. Secondly, they can roll over [the loan]. During the preparation of the Sochi Olympics and during the preparation of the Universiade in Kazan, Krasnodar Krai and Tatarstan had their loan extended by 20 years.”
But how can the regions escape this? Rosbalt asks.
“Wait and see. Never say “never” — this is Russia.”
Rosbalt then asks about Federation Council Speaker Valentina Matviyenko’s recent suggestion that the Kremlin resume its amalgamation program in Russia’s regions.* Matvieynko has made such comments before. See for example this statement from 2013:
Speaking in Kazan on Wednesday, Matviyenko said that the current number of federal subjects—83—is “too large” and that the differences in economic and social terms among them are too great. Consequently, some of them should be combined together by referendum, although she refused to say which ones (www.kommersant.ru/doc-y/2126614).
Zubarevich answers Rosbalt’s question:
“They think it is easier. Connect fat with lean, you get average. It seems to me that this is a very simplistic view of the problems in the regions.”
She also seems to think that it is unlikely that Matviyenko’s suggestion will be heeded because it will create “turbulence. The elites do not want it. We would have to dramatically change management. And the population also does not want this, people are accustomed to their regions.”
* If you are interested in reading more on the Kremlin’s amalgamation plans Paul Goble has written extensively on this subject over the past several years.