Regional government debts: among the largest debtors are Krasnodar, Krasnoyarsk and Tatarstan. Why Russian regions cannot get out of debt Rating of Russian regions by debt burden
Rating of Russian regions by debt. The volume of debt of the federal subjects in Russia is still relatively small, but at the beginning of this year, already a third of the regions fall into the zone of debt instability, and a tenth of them violate the debt standards established by law.
The debt of the subjects of the Federation in Russia as of January 1, 2017 amounted to 2.35 trillion rubles. Debt of municipalities – 0.36 trillion. This is quite a bit for the large Russian economy: a total of about 3.2% of the country's GDP. For comparison: the federal public debt of the Russian Federation at the beginning of 2017 was four times larger - about 10.4 trillion rubles. (internal and external).
But when compared with the regions’ own incomes, the debt burden on the regions seems significant - it amounts to about a third of their own incomes. This is a significant, if not critical, value.
However, 42% of this debt is the non-market debt of the regions to the Russian Federation (the interest rate on it is 0.1% per year, compare with commercial rates - above 10%). It is clear that with such percentages, the share of debt servicing costs on average in the budgets of the constituent entities is very small (2.3% on average as of January 1, 2016).
Regional debt has been growing significantly over the past 10 years. During the previous crisis (2008–2009), it jumped from 15% of the regions’ own income to 25%. The current one increased it to 32.8% in 2016.
In recent years, a policy has been pursued of gradually replacing commercial loans with budget ones. The share of commercial loans in the government debt of constituent entities decreased from 66% in 2013 to 54% in 2016. But it is obvious that the Ministry of Finance of the Russian Federation is carrying out this replacement reluctantly and slowly, and is not at all eager to take on the debts of the regions. Although sometimes this seems preferable to the Ministry of Finance than providing the regions with additional non-repayable subsidies. In addition, there are purely political benefits of such a strategy - the regions’ dependence on the government and the Kremlin increases, which is important during the pre-election period.
The financial department strongly emphasizes that the process of replacing commercial loans with budget ones is a temporary anti-crisis measure. In 2016, in the first 11 months, the Ministry of Finance provided regions with interbudgetary loans worth 305 billion rubles. (including repayment – 185 billion rubles). This is almost 8% of the regions’ debt – in general, a lot. For 2017–2018, the budget law plans to provide them in the amount of 200 billion rubles. (this amount was “knocked out” during the bargaining in the Federation Council, the figures were initially expected to be half that amount), and in 2019 – 50 billion rubles. The replacement process is slowing down.
The share of securities in regional debt has remained unchanged over the past two years – 19% (2013 – 26%). The leadership of the constituent entities of the Federation was clearly unable to implement Vladimir Putin’s recommendation on the preference for using bond mechanisms for raising funds over bank loans. At the beginning of 2017, 44 regions (more than half) had no debt in securities. According to the Ministry of Finance, in 2016, 74 subjects of the Federation planned to attract bank loans, but only 27 planned to issue bonds (22 regions actually carried it out). At the same time, the main instrument for placing regional bonds on the market is not auctions, but “bookbuilding” (formation of an order book, in fact, an auction in reverse, with a decrease in the rate). In the practice of issuing bonds of the Russian Federation on the domestic market, almost only an auction is used. This demonstrates a clear lack of demand for regional bonds.
"Beyond the Line"
8 regions - almost every tenth - have already turned out to be fined, violating the Budget Code of the Russian Federation. It prohibits regions from borrowing above the level of their own income (for highly subsidized regions - 50% of their own income). A list of these 8 regions is shown on the map).
However, the restrictions of the Budget Code in practice are very “soft”. Until January 1, 2018, the amount of budget debt is not taken into account in the maximum amount of the state debt of the subject, as well as the amount of budget loans attracted in the current year. Taking this into account, only one region out of 8 is “penalized” - the Republic of Khakassia with its large share of commercial loans. And the leader - Mordovia - drops from the sky-high 176% to an acceptable 77%. And there are no penalties for violating the state debt limits of subjects established by the Code. However, the Ministry of Finance, of course, has quite enough leverage to “call to order” especially outstanding ones.
But there is no great desire to use them. For example, the financial department was unable or unwilling to oppose Mordovia’s powerful borrowing program: over the past 3 years, it has increased its debt by more than 1.5 times, including through budget loans. It seems that no one in the country is particularly concerned about the situation, including Mordovia itself. Why should she worry? Despite the record debt, the cost of servicing it in the 2017 budget is a modest 2.4% - almost at the level of the regional average for Russia.
The only concern is the international rating agency Fitch, which in February 2016 assigned and in August confirmed a long-term rating for Mordovia at B+, with a stable outlook. It classifies it as a high-risk speculative rating: “financial obligations are currently being met, but the ability to continue payments is vulnerable if the business environment or economic conditions deteriorate.” For comparison: Russia's rating, according to Fitch, is BBB- (below average reliability).
Fitch commented on its decision on Mordovia in August as follows: “the republic’s volatile operating performance and high direct risk due to significant capital expenditures, which are mitigated by obtaining long-term loans from the federal budget at a low interest rate.” And it threatened the republic with a downgrade if the “direct risk” (the ratio of debt to own income) exceeds 140%. As we see, it exceeded, and significantly. So far Fitch has not responded to this.
The above-mentioned “fine” Republic of Khakassia, even under the current lenient requirements of the Budget Code, with a high commercial debt, is assessed by the same Fitch more favorably: its rating is higher, BB-, the forecast is stable. “Khakassia’s operating balance is acceptable, which nevertheless remains insufficient to cover increased interest payments due to the high direct risk accumulated as a result of a significant budget deficit,” agency analysts write.
What about the Ministry of Finance? In the recently published “Main Directions of Debt Policy...” he admits violations in 8 regions and that in 2017 several more regions will cross the “line.” But the average level of debt burden of the subjects is assessed as “acceptable”, since it “does not bear significant risks of a debt crisis.”
"Red Zone"
The Budget Code of the Russian Federation defines two criteria for the debt sustainability of subjects:
– debt to own income,
– debt servicing costs to total budget expenditures*.
According to the second criterion, the regions are doing well - due to the high share of interbudgetary loans in debt with almost zero interest. But there are obvious problems with the first criterion.
The Ministry of Finance considers regions with “low debt sustainability” to be those whose debt-to-income ratio is over 85% (for highly subsidized entities – over 45%). The list includes 24 regions according to the first criterion (8 “beyond the line” and 16 “below the line”). According to the second criterion, 3–4 dozen regions** may qualify, of which no more than a dozen have a debt-to-income ratio below 45%.
Thus, more than a third of Russian regions fall into the “low debt sustainability” column, and a tenth are frankly below the debt risk line.
The list of “red zone” regions itself looks very diverse: there are national republics and Central Russian regions. The regions are headed (they were during the collection of debt) by both pro-government “appointees” and former communists or completely liberal governors. But what is practically absent there are neither donor regions (they earn enough to borrow little) nor subsidized regions (they have too little of their own income to borrow much).
"Norm"
2 regions do not have public debt at all - this is the “donor” Sakhalin region, which has been making good money for the last decade on PSA oil projects, and the “subsidized” city of Sevastopol, which has more receipts from the federal budget than its own income, and apparently did not have time to collect for the last 3 years of loans. But the Republic of Crimea made it: its debt is 5.4 billion rubles. (17.5% of own income).
9 regions of the country have public debt below 10% of their own income - these are mainly rich regions with high tax revenues. The Altai Territory looks strange in this list with its subsidy rate of 66%; it clearly lags behind other regions with its borrowings. But, according to the three-year budget he adopted, the region is beginning to actively borrow and will leave this group already this year (i.e., it will accumulate debt).
Here, “normally”, are almost all the “donor” regions **** - Moscow, St. Petersburg, oil and gas Khanty-Mansi Autonomous Okrug, Yamalo-Nenets Autonomous Okrug, Nenets Autonomous Okrug, as well as Tatarstan and others. The debt of these regions has one distinct feature - it is mainly government securities. Thus, in the Khanty-Mansi Autonomous Okrug their share amounted to 87% of the region’s total debt, in Moscow – 78%, in the Krasnoyarsk Territory – 63%. The remaining part of the debt is inter-budgetary loans; these regions borrow little from banks (too expensive, bonds are cheaper). Their credit ratings, as a rule, are at the level of the Russian Federation or slightly lower.
But the leading regions in terms of the level of subsidies entered the “average”, above the Ministry of Finance “norm” (with debt from 50% to 85% of their own income). These are Ingushetia (receipts from the federal budget are 7.9 times higher than their own income), Chechnya (5.4 times), Tyva (4.3 times), etc. With such low own income, even a small debt already brings these regions to a high level .
Debt "traffic light"
Thus, approximately a third of the subjects are in the “green” (within the Ministry of Finance’s “norm”) in the “red” (risky) zones, and the remaining third are in the “yellow”.
The average level of regional debt does not pose a threat to the country. Even debt leaders today are very far from the possibility of default. Nevertheless, the Ministry of Finance took measures to contain regional budget deficits, causing them to enter the commercial loan market. So far, nothing special has been needed for this. Enough of the “moral” work with debtors... and the pressure of the level of subsidies. In 2016, the growth of regional debt practically stopped, and its structure for the regions improved - the share of budget loans with near-zero interest increased. Even debt-leader regions with pre-default ratings (for example, one letter “B” from Fitch) have not yet encountered difficulties in making new loans. And they are even planning to enter the government securities market. The amount of debt service for the regions of the “red” zone is not critical for the federal budget.
But what could happen if oil prices suddenly go down and the federal budget deficit begins to increase? The instability of the federal situation can immediately spread to the regional level. In addition, this year will be the last to calculate the results of the implementation of the May (2012) presidential decrees, according to which the main share of funding is assigned to the regions. How can they report? The problem of regional debts is still small (although it is growing), but, as they say, it is not the path up the mountain that irritates, but the pebble in the shoe...
* The BC RF sets the limit value of this indicator at 15%. The Ministry of Finance considers the share of service costs in the total own expenses of St. to be critical. 8%, but almost all Russian regions, as far as one can judge, are still outside the risk zone.
** Highly subsidized regions are those in which gratuitous receipts from the federal budget exceed 40% of the volume of own revenues of the consolidated budget of a constituent entity of the Russian Federation during two of the last three years. Accurate calculations are very labor-intensive; the list of highly subsidized regions is not officially published.
*** See “Recommendations for the implementation by constituent entities of the Russian Federation of a responsible borrowing/debt policy” on the website of the Ministry of Finance.
**** See the list of “donor” regions in the “Rating of Russian Regions”, “Profile” No. 47 dated December 19, 2016.
The largest contribution to the reduction in the total volume of public debt of the regions of the Russian Federation, which, according to the Ministry of Finance, has decreased since the beginning of this year by 6% to 2.212 trillion rubles as of October 1, was made by the Sverdlovsk region and Moscow. This was reported by the RIA Rating agency, which compiled a rating of the constituent entities of the Russian Federation according to the level of debt burden based on the results of nine months of 2017.
As analysts point out, the share in the structure of public debt continues to increase budget loans: as of October 1, 2017 it was 50%. The share of commercial loans decreased by 10 percentage points to 24%. In nine Russian regions, budget loans account for 100% of public debt, and in another four this share exceeds 90%.
Commercial loans 55 Russian regions are present in the debt structure, while a year earlier there were 13 more such regions. In 14 regions, the share of commercial loans in the total debt structure exceeds 50%, including in the Nenets Autonomous Okrug it is 100%. But the debt burden on the NAO budget is low: as of October 1, the ratio of public debt to tax and non-tax revenues of the district budget was 16.5%, showing a noticeable decrease compared to the result at the end of 2016. Of the 14 regions where the share of commercial loans is above 50% of the public debt, in nine the debt burden on the budget exceeds 80%.
Specific gravity government securities rose to 21%. The largest share of government securities in the total volume of government debt is still observed in the Khanty-Mansiysk Autonomous Okrug - Ugra (87%). The Yamalo-Nenets Autonomous Okrug increased the share of government securities to 82%. Share state guarantees in the structure of regional debts for the nine months of 2017 did not change and amounted to 4%.
The first federal placement of regional government bonds for individuals took place in Russia
The Yamalo-Nenets Autonomous Okrug placed its debut issue of government bonds for the population. The issuer was the Department of Finance of the Yamal-Nenets Autonomous Okrug, the placement agents were Gazprombank and Zapsibkombank.
Volume municipal debt amounted to 353.9 billion rubles, which is 2.8% lower than as of January 1, 2017. The total volume of public debt of all constituent entities of the Russian Federation and the debt of municipalities that are part of the constituent entities of the Russian Federation as of October 1 amounted to 2.566 trillion rubles (minus 5.6% from the beginning of the year).
Russian regions continue to demonstrate multidirectional dynamics in the volume of public debt, while the debt burden was reduced in 49 regions, including in 15 regions the public debt decreased by more than 20% over nine months. The leader was the Republic of Crimea, whose public debt has decreased by 92.6%. St. Petersburg (by 42.6%), Perm Territory (by 39.9%), Tver Region (by 33.5%) and the Chuvash Republic (by 30.5%) also significantly reduced their debt.
In six Russian regions, the volume of public debt did not change over the nine months of 2017, while in 28 it increased. Ahead of everyone else in terms of pace increasing the volume of public debt Kalmykia (plus 25.4%) and Ingushetia (plus 25.1%). In three more regions of the Russian Federation, the volume of public debt increased by more than 15%. In Sevastopol and the Sakhalin region there is still no public debt.
The most significant public debt remains with the Krasnodar Territory (142.2 billion rubles), but over the nine months of this year it decreased by 5.2%. The next three regions with public debt exceeding 90 billion rubles also did not change. This group includes the Moscow region (90.4 billion rubles), the Krasnoyarsk Territory (92.8 billion) and Tatarstan (93.4 billion), and in the first two regions the volume of public debt decreased slightly this year, while in Tatarstan it remained unchanged .
Demonstrated the most noticeable reduction in public debt in absolute terms The Sverdlovsk region and Moscow reduced the figure by 16.6 billion and 14.1 billion rubles, respectively. In another nine regions, public debt decreased by 6-9 billion. These 11 leading regions provided 73% of the reduction in the total public debt of the constituent entities of the Russian Federation.
Of the 28 regions that increased public debt, the most noticeable increase in absolute terms noted in the Kostroma region (plus 5.1 billion rubles), Yakutia (plus 5.3 billion) and Mordovia (plus 6.5 billion).
General debt level regions continues to decline. Attitude total national debt all regions as of October 1, 2017 To total volume of tax and non-tax revenues for 12 months(from September 1, 2016 to September 1, 2017) amounted to 30%, which is 3.8 percentage points lower than at the beginning of 2017. But the range of values regionally is still very wide: from 0% in Sevastopol and the Sakhalin region to 194.2% in Mordovia.
In addition to Mordovia, in seven more regions of the Russian Federation the volume of public debt exceeds tax and non-tax budget revenues(including Khakassia, which declared a financial catastrophe today with a debt burden of 144.5%. - Note by Banki.ru). In addition to Mordovia and Khakassia, the number of regions with a debt burden exceeding income includes the Kostroma region, Kabardino-Balkaria, Karelia, Smolensk, Pskov regions, as well as the Jewish Autonomous Region.
Khakassia announced a financial disaster in the region
The Supreme Council of Khakassia appealed to Russian Prime Minister Dmitry Medvedev and State Duma Chairman Vyacheslav Volodin with a request to allocate 28.2 billion rubles to the region, according to a message on the council’s website.
In 39 Russian regions, public debt as of October 1, 2017 ranged from 50% to 100% of tax and non-tax budget revenues, of which in 23 constituent entities of the Russian Federation public debt exceeded 70% of their own revenues.
Low debt burden(up to 10%) remains in ten Russian regions. The Republic of Crimea returned to this group, having almost completely paid off its public debt; this top ten also includes Sevastopol and the Sakhalin region with a zero debt burden, the Tyumen region, St. Petersburg, Moscow, Altai Territory, Leningrad Region, Primorsky Territory and Vladimir Region.
As of October 1 debt burden reduced 57 Russian regions. The leader in decline was the Astrakhan region (minus 38.7 p.p.), the Tver region (minus 22.7 p.p.) and the Kemerovo region (minus 21.2 p.p.) were also in the top three. The most significant in Kabardino-Balkaria (plus 36.5 percentage points), Kostroma region (plus 20.4 percentage points) and Mordovia (plus 18.2 percentage points).
According to experts from the RIA Rating agency, the trend towards reducing public debt and the debt burden will probably not be maintained until the end of the year. Despite the fact that regional authorities have begun to take a more conservative approach to the issue of increasing borrowing, in November - December many have to resort to this method of replenishing the regional treasury to fulfill various social obligations. Therefore, based on the results of 2017, RIA Rating expects the growth of regional public debt within 5%, and tax and non-tax revenues of regional budgets - within 10%. In this case, the debt burden will be 31-32% and will not change significantly compared to last year’s result.
In modern conditions of post-crisis development of financial and economic systems and unstable economic relations, issues of public debt of the constituent entities of the Russian Federation at all levels are one of the most important and pressing tasks of the balance and security of the regional economy. In this regard, the problems of growing debt obligations of the constituent entities of the Russian Federation come to the fore.
Having barely recovered from the financial crisis of 2008-2009, which unbalanced the regional budget system and led to an accelerated increase in the debt burden, the regions faced new problems that limited the ability to ensure a positive budget balance.
According to the Ministry of Finance of the Russian Federation, the total volume of public debt of all regions of the Russian Federation continues to grow. Over the past six years, the volume of public debt of the constituent entities of the Russian Federation has consistently increased. In 2010, the state debt of the constituent entities for the first time exceeded the mark of a trillion rubles, and at the beginning of 2011, regional debt amounted to 1,095.9 billion rubles. In total, for the period from January 1, 2010 to January 1, 2016, the debt obligations of the constituent entities of the Russian Federation increased by 1,427.7 billion rubles, or 2.5 times. As of January 1, 2016, the public debt of the constituent entities of the Russian Federation amounted to 2,318.5 billion rubles. At the same time, the maximum growth – 28.2% occurred in 2013. In 2013, the volume of debt obligations increased by 386.1 billion rubles. The weakest increase occurred during 2011, where the debt obligations of the entities increased by 75.9 billion rubles. Also, during the period under review, there was an increase in the cost of servicing the public debt of the constituent entities of the Russian Federation by an average of 72.5% per year. The dynamics of public debt of the subjects is presented in Figure 1
Rice. 1 Dynamics of public debt of the constituent entities of the Russian Federation in 2010-2016.
At the same time, since 2010, there has been an increase in deficit regions. The main reason for the deterioration of the situation is attributed to the fall in tax revenues after the 2008 financial crisis. At the same time, the decrees of the President of the Russian Federation “On measures for the implementation of state social policy” constituted a significant burden on the regions. The main goals of implementing the “May Decrees” were to increase wages for employees of budgetary institutions and intensify housing construction in the regions. At the same time, the main costs of implementing these decrees fell on the budgets of the constituent entities of the Federation. After 2013, a record year in terms of the number of deficit regions and the total volume of the budget deficit, the growth rate of regional and municipal debt, in 2014 the regions faced new challenges of the macroeconomic environment - a decrease in the availability of credit resources, a deterioration in credit ratings, a reduction in economic activity, leading to a decrease in level of tax revenues. Against the backdrop of growing social obligations, partially compensated from the federal budget, and debt servicing costs, regions will have to independently develop anti-crisis budget and debt policy measures and attract additional sources of financing.
Rice. 2. Dynamics of surplus and deficit regions in the period from 2011-2015.
Since 2011, the number of surplus regions has been decreasing; if at the beginning of 2011 there were 20 of them, then by the beginning of 2015 only 11 regions did not have a budget deficit.
At the end of 2013, the total deficit of regional budgets increased 2.3 times compared to the previous year and amounted to a record 640.0 billion rubles or 7.8% of the total income of the constituent entities (versus 3.5% in 2012). In 2012, expenditures exceeded revenues in 67 regions (total deficit of 355.0 billion rubles), 16 regional budgets had a surplus (total amount of 76.0 billion rubles). Thanks to gratuitous revenues from the federal budget, last year six regions managed to execute the budget with a surplus (St. Petersburg, Moscow Region, Altai Republic, Kamchatka Territory, Karachay-Cherkessia, Chechen Republic). The total surplus amounted to less than 27 billion rubles. The total deficit of the remaining 77 regions amounted to 666 billion rubles, the main reason for which was the fall in income tax revenues
Despite the fact that during 2014 a budget surplus was recorded in almost a third of Russian regions (mainly export-oriented), by the beginning of 2015 the economic situation of the regions showed less optimistic results: the volume of the regional budget deficit reached 448 billion rubles and only 11 regions reduced budget with a surplus - export-oriented (Leningrad, Kaliningrad and Lipetsk regions, oil - Sakhalin and Tyumen (including the Khanty-Mansi Autonomous Okrug and Yamal-Nenets Autonomous Okrug) regions) and highly subsidized subjects (the republics of Ingushetia and Altai, annexed territories of the Crimean Federal District). The dynamics of surplus and deficit regions is presented in Figure 2.1.2.
An adequate assessment of the public debt of the constituent entities of the Russian Federation is possible based not only on the volume and dynamics, but also on its structure. As noted earlier, the state debt of the subjects is growing at a significant pace. In accordance with the Main Directions of the Debt Policy of the Russian Federation for 2013-2015, state policy in the field of public debt is aimed at ensuring the fulfillment of budget obligations, developing the effective issue of government securities and minimizing the cost of government borrowing. Following the increase in regional debt, the structure of regional borrowing changes. For a detailed study of the structure of public debt of the constituent entities of the Russian Federation, let us turn to Table 1.
In the context of an unfavorable economic situation and the need to fulfill social obligations, the debts of Russian regions continue to grow, but compared to previous years, the pace has decreased slightly. The total volume of public debt of all subjects of the Russian Federation increased by 10% and as of January 1, 2016 amounted to 2,318.5 billion rubles, which is by 228 billion rubles. more than a year earlier. For comparison, in 2013, public debt increased by 25%, but before that the increase was less significant, in 2011 - 7%, in 2012 - 15.6%.
Table 1 Structure of public debt of the constituent entities of the Russian Federation in 2010-2016, billion rubles.
| Indicators |
as of 01/01/10 |
as of 01/01/11 |
as of 01/01/12 |
as of 01/01/13 |
as of 01/01/14 |
as of 01/01/15 |
as of 01/01/16 |
| Total public debt of the constituent entities of the Russian Federation, including: |
890,80 |
1 095,99 |
1 171,80 |
1 351,46 |
1 737,4 |
2 089,51 |
2 318,59 |
| a) government debt securities of constituent entities of the Russian Federation |
377,75 |
407,30 |
343,88 |
375,41 |
450,65 |
442,14 |
432,76 |
|
42,35 |
37,16 |
29,29 |
27,75 |
25,90 |
21,15 |
18,63 |
|
| b) loans received by constituent entities of the Russian Federation from credit organizations and foreign banks |
216,85 |
232,70 |
299,98 |
438,22 |
691,54 |
888,09 |
965,43 |
| in % of the volume of public debt of the subjects |
24,26 |
21,25 |
25,53 |
32,42 |
39,78 |
42,50 |
41,63 |
| c) state guarantees of the constituent entities of the Russian Federation |
120,15 |
115,81 |
108,46 |
111,48 |
124,25 |
111,27 |
102,95 |
| in % of the volume of public debt of the subjects |
13,48 |
10,50 |
9,22 |
8,21 |
7,13 |
5,31 |
4,40 |
| d) budget loans attracted to the budget of constituent entities of the Russian Federation from other budgets of the budget system |
175,78 |
340,07 |
419,38 |
426,21 |
470,93 |
647,45 |
808,67 |
| in % of the volume of public debt of the subjects |
19,66 |
31,05 |
35,78 |
31,53 |
27,05 |
30,97 |
34,85 |
| e) other debt obligations of constituent entities of the Russian Federation |
0,26 |
0,18 |
0,86 |
0,85 |
0,85 |
0,55 |
0,87 |
| in % of the volume of public debt of the subjects |
0,25 |
0,04 |
0,18 |
0,09 |
0,14 |
0,07 |
0,49 |
Period 2010-2016 was characterized by a significant change in the structure of public debt of the constituent entities of the Russian Federation towards an increase in the share of obligations for attracted budget loans from other budgets of the budget system of the Russian Federation and a decrease in the share of market debt. The observed increase in the volume of budget loans provided to the regions is a measure aimed at stabilizing the regions’ debt burden due to its sharp increase since 2013. As of January 1, 2010, debt obligations under budget loans amounted to 175.78 billion rubles. Over 6 years, the volume of debt obligations increased by more than 4.5 times, and at the beginning of 2016 amounted to 808.67 billion rubles. A significant increase was noticed in 2010. In 2010, the volume of budget loans increased by 2 times. If in 2010 the share of budget loans was 19.66% in the total volume of public debt of the constituent entities, then at the beginning of 2016 the share was 34.85%.
The growth in debt is caused primarily by the federal initiative to increase salaries in the public sector. It was assumed that part of the additional costs would be subsidized by the federal budget, and the regions would raise part of the funds on their own. Despite the optimization of individual items of regional budgets and the restructuring of expenses in favor of the wage fund, many regional authorities were forced to increase commercial debt. As a result, the debt burden on the regional ones became too burdensome (up to 5% or more of the regions’ total expenses). As a result, already in 2014, the Russian Ministry of Finance was forced to double the volume of budget loans allocated to the regions, but this did not relieve the regions from the need to further increase bank loans.
Budget loans are the most profitable instrument for financing regional budget deficits - their cost is 0.1% per annum, and the period of provision is up to three years. The total volume of budget loans planned for 2016 remains at the level of 2015 – 310 billion rubles. The grounds on which federal subjects will be able to take advantage of budget loans in 2016 are determined by Decree of the Government of the Russian Federation of January 27, 2016 No. 40.
Also, in the structure of public debt of the constituent entities of the Russian Federation, steady growth was observed in loans received by the constituent entities of the Russian Federation from credit institutions and foreign banks. From 2010 to 2016 the volume of public debt of subjects in this column increased by 748.58 billion rubles. and at the beginning of 2016 amounted to 965.43 billion rubles. It is noteworthy that at the beginning of 2010, the share of loans accounted for 24.26% of the total public debt of the subjects, but by the beginning of 2016 the share in this column amounted to slightly less than half of the total debt.
Particular attention is paid to state guarantees of the constituent entities of the Russian Federation. In the structure of public debt of the subjects, their share and volume is insignificant. If at the beginning of 2010 the volume of state guarantees of subjects amounted to 120.15 billion rubles, then at the beginning of 2016 the volume remained virtually unchanged and amounted to 102.95 billion rubles.
There were no significant changes in government debt securities of the entities; over 6 years the values remained virtually unchanged and at the beginning of 2016 the debt amounted to 432.76 billion rubles. It is worth noting that the share of government debt securities has a downward trend. If at the beginning of 2010 the share was 42.35% of the total public debt of the constituent entities, then at the beginning of 2016 the share decreased noticeably and amounted to 18.63%, but the volume of borrowing did not decrease significantly. This is caused primarily by an increase in debt obligations on other instruments.
In accordance with the main directions of budget policy for 2015 and the planning period 2016-2017, to maintain a balanced budget of the constituent entities of the Russian Federation and local budgets, measures are being taken to limit budget deficits and debt levels. The volume of public debt of the subjects is presented in Appendix 1.
In particular, to maintain the balance of regional budgets, conditions are provided for the subjects of the Russian Federation to receive budget loans; for these purposes, measures are taken to increase their own revenue base, reduce ineffective expenses, reduce the attraction of expensive commercial loans, and curb the increase in the volume of public debt. In accordance with the Budget Code of the Russian Federation, the maximum amount of public debt of a subject should not exceed the approved total annual volume of budget revenues of the subject without taking into account the approved volume of gratuitous receipts.
Despite the general increase in total debt, there are also positive trends. In 2016, some regions managed to reduce their debts. The volume of public debt decreased most noticeably (by more than 20%) in the Lipetsk region (-6%) and the city of Moscow (-14%). In three regions, the volume of public debt did not change. In two of them – the city of Sevastopol and the Sakhalin region – there is no public debt; in St. Petersburg, the public debt remained at the level of the beginning of 2015. But this is where the positive trends end. The difficult economic situation, as expected, continues to make adjustments to the budget programs of the regions, forcing them to look for external sources of financing for their projects and social obligations. At the end of 2015, 67 regions increased the volume of public debt. The Nenets Autonomous Okrug, which for several years had no debt at all, joined this list. In addition to it, the volume of public debt increased most noticeably in the Tyumen region (+218%), Irkutsk region (+79%) and Magadan region (+65%). At the same time, despite the significant increase in public debt in the Tyumen region and the Nenets Autonomous Okrug, the level of debt burden in these regions remains low.
The highest amount of debt was noted in Moscow (140 billion rubles) and Krasnodar Territory (145 billion rubles). But, despite the fact that the volumes of debt in these two regions are approximately equal, the indicators of the debt burden on the budget differ significantly. During 2015, Moscow reduced the volume of public debt by 14%, and the ratio of public debt to the capital’s own income is 9.1%, which is by 1.6 percentage points. lower than on January 1, 2015. According to this indicator, Moscow is among the top ten leaders among all regions of the Russian Federation. In the Krasnodar Territory, the ratio of public debt to tax and non-tax revenues is 93.6% and over the past nine months the pressure on the regional budget has increased by almost 1 percentage point, and the volume of public debt has increased by 1.9%. According to the results of the first half of the year, in another region – the Republic of Tatarstan – the level of public debt exceeded 93 billion rubles. But the Republic of Tatarstan repaid part of the debt in three months, and at the beginning of 2016 the amount of debt amounted to 90 billion rubles, which is 2.8% lower than at the beginning of the year.
For a more detailed analysis of the public debt of the constituent entities of the Russian Federation, let us turn to Table 2, where we consider the 5 strongest and weakest regions in terms of the level of debt burden, which reflects the distribution of regional debts and their dynamics.
The overall level of regional debt burden by the beginning of 2016 remained virtually unchanged compared to the indicators at the beginning of the year. The ratio of the total public debt of all regions as of January 1, 2015 to the total volume of own income over the past 12 months was 35% versus 35.4% at the beginning of 2015. At the same time, the range of changes in the indicator by region is quite wide - from 0% in the Sakhalin region and the city of Sevastopol up to 176.2% for the Republic of Mordovia. The latter is unable to stabilize the situation: despite the fact that the republic has been a record holder in terms of debt burden for quite a long time, in 2016 the volume of public debt increased by another 20.3%, and the volume of its own income for 8 months of 2015 decreased by 23.5%. Thus, the level of debt burden of the Republic of Mordovia increased by 55.1 percentage points, approaching a record value in recent years.
Table 2 Comparative characteristics of the level of debt burden of the constituent entities of the Russian Federation at the beginning of 2016
|
The subject of the Russian Federation |
Ratio of the subject's public debt as of 01/01/16 to tax and non-tax revenues as of 01/01/15, in % |
Ratio of the subject’s public debt as of 01/01/15 to tax and non-tax revenues at the end of 2014, in % |
The volume of public debt of a constituent entity of the Russian Federation at the beginning of 2016, million rubles. |
Change in public debt for 2015, in% |
Change in tax and non-tax revenues of the budget of a constituent entity of the Russian Federation in 2015 compared to 2014, in% |
| Sevastopol |
17.6 |
||||
| Sakhalin region |
64.4 |
||||
| Tyumen region |
1 139,9 |
218.8 |
12.0 |
||
| Republic of Crimea |
405,16 |
13.4 |
51.4 |
||
| Saint Petersburg |
14 736,91 |
||||
| Belgorod region |
113.4 |
106.1 |
42 330,42 |
||
| Chukotka Autonomous Okrug |
117.6 |
144.5 |
14 097,10 |
51.3 |
|
| Kostroma region |
123.6 |
121.1 |
17 692,12 |
||
| Republic of North Ossetia–Alania |
126.1 |
114.9 |
9 063,69 |
12.3 |
|
| The Republic of Mordovia |
176.2 |
121.1 |
36 042,83 |
20.3 |
23.5 |
In addition to the Republic of Mordovia, in another eleven regions the ratio of public debt to tax and non-tax revenues exceeds 100% and the top five anti-leaders for this indicator also include: the Republic of North Ossetia - Alania (126.1%), Kostroma region (123.6%), Chukotka Autonomous Okrug (117.6%) and Belgorod Region (113.4%). Moreover, the pressure on the budget is decreasing only in the Chukotka Autonomous Okrug, from 144.5% to 117.6% in 2016; in all other listed regions, the debt burden is growing. In addition, in another twenty-two regions of the Russian Federation, the level of debt burden ranges from 70% to 100%.
As before, only nine Russian regions have a low level of debt burden. Public debt is below 10% of the volume of tax and non-tax revenues in the Sakhalin region (0%), Sevastopol (0%), Tyumen region (0.8%), the Republic of Crimea (1.3%), St. Petersburg (3.5%), Nenets Autonomous Okrug (3.6%), Altai Territory (4.5%), Khanty-Mansiysk Autonomous Okrug (6.5%) and Moscow (9.1%). Despite the fact that the volume of public debt has increased significantly in both the Tyumen region and the Nenets Autonomous Okrug, this has not affected budget stability.
In total, in 22 Russian regions the ratio of public debt to own income does not exceed 35%. Moreover, according to the results of nine months of 2015, in two regions this indicator remained unchanged, and in another 17 it decreased. In total, across Russia, a decrease in the debt burden on the budget was recorded in 42 Russian regions. The leaders in terms of dynamics were the Chukotka Autonomous Okrug (-26.5 p.p. since the beginning of 2015), the Republic of Buryatia (-18.6 p.p.) and the Republic of Ingushetia (-18.1 p.p.).
Thus, the situation with regional public debts remains tense. In 2015, only certain regions recorded a decrease in public debt. In accordance with the main characteristics of regional budgets, in the coming period, most constituent entities of the Russian Federation plan to have budget deficits. Most regions have high debt burdens and high public debt arrears. Despite the stagnating economy, regions have to look for funds to implement social obligations.
(date of access: 02.12.2016)
In addition to sovereign debt, the general debt system of the Russian Federation includes subfederal and municipal debt. It is a consequence of the accumulated budget deficit of regions and local budgets. More than 20 subjects of the Federation have a deficit exceeding 5% of income, including such large ones as the Krasnodar and Krasnoyarsk territories.
The total share of regional and municipal debt is consistently at the level of 20% of the country's total debt. The amount of debt is presented in table. 7.9.
Table 7.9. Subfederal and municipal debt
The largest share (85%) of the territories' debt is occupied by the debt of the subjects of the Federation. Over the past 5 years, the volume of public debt of the constituent entities of the Russian Federation has consistently increased by an average of 25% annually (Fig. 7.13). As of November 1, 2013, the debt of the constituent entities of the Federation amounted to 1.47 trillion rubles, or 2.2% of GDP.
Rice. 7.13.
In accordance with the Budget Code of the Russian Federation, the maximum amount of public debt of a subject of the Federation and municipal debt should not exceed the total annual budget revenues of the subject of the Federation and the municipality without taking into account gratuitous revenues. For constituent entities of the Russian Federation, in whose budgets the share of interbudgetary transfers from the federal budget (with the exception of subventions, as well as subsidies from the Investment Fund of the Russian Federation) during two of the last three reporting financial years exceeded 60% of the volume of own revenues of the consolidated budget of the subject, the maximum amount of public debt is limited 50% of the above income.
The maximum amount of expenses for servicing the public debt of a constituent entity of the Russian Federation or municipal debt in a financial year should not exceed 15% of the volume of expenses of the corresponding budget (excluding expenses from subventions from other budgets).
As of September 1, 2012, the share of budget loans in the structure of regional debt exceeded 37%, the share of securities amounted to almost 30%, the share of bank and other loans accounted for about 24%, and the share of state guarantees of entities - almost 10% (Fig. 7.14).
Rice. 7.14.
The market debt of territories in the form of issues of securities of regions and municipalities at the end of 2012 amounted to 345 billion rubles. (Table 7. 10). This is 7.5% of the total volume of the government securities market. The portfolio of regional bonds traded on the Moscow Exchange consisted of 92 issues from 36 issuers. The largest borrower is Moscow (44% of all issues).
Table 7.10. Domestic market for subfederal and municipal bonds, billion rubles.
A peculiarity of the structure of regional debt is that in recent years the share of market debt has been falling, while the share of loans from other budgets has been growing.
The growth of budget loans is explained by a conscious national policy; In the coming years, budget lending to the regions will decrease, which will give the regions greater freedom to issue securities.
Regions have the right to borrow from abroad. Under the terms of the Budget Code, six entities can now borrow from abroad: Moscow, St. Petersburg, Tyumen Region, Khanty-Mansiysk Autonomous Okrug - Yugra, Yamalo-Nenets Autonomous Okrug and the Republic of Bashkortostan. But in fact, only the city of Moscow and the Republic of Bashkortostan have debts in foreign currency to foreign banks. In order to enter foreign markets only financially stable regions, it is planned to introduce the following norm. For external loans, it is necessary to have credit ratings from at least two leading international rating agencies at a level not lower than the level of sovereign ratings of Russia. Only four of the six entities that are allowed to borrow abroad have the required credit ratings.
At the same time, many bonds of the constituent entities of the Federation and municipalities are of high quality: 35 issues are included in the Lombard List of the Bank of Russia. This is a list of high-quality reliable assets against which the Bank of Russia issues loans to commercial banks.
Accumulated debts require regions to pursue a balanced debt policy. Regulation and monitoring of the state of public debt of the constituent entities of the Russian Federation and municipal debt are of great importance. It is planned to strictly adhere to budgetary restrictions on the maximum amount of debt, deficit, and debt servicing costs. To ease financial stress in the regions, it is open regional debt restructuring program for budget loans, including consolidation of loans, write-off of fines and penalties and repayment of loans in equal installments until 2016.
In order to strengthen the financial sustainability of regional budgets, it is possible to create reserve funds of the constituent entities of the Russian Federation similar to sovereign funds. This is especially important for those entities whose income is subject to changes in the macroeconomic environment and where large taxpayers are registered. The region will be able to cover from its reserve fund a deficit of more than 10% of the revenue portion - without taking into account federal transfers and funds from privatization and regional property.
- check the execution of the budget of a constituent entity of the Russian Federation;
- budget execution may be transferred under the control of the Ministry of Finance of the Russian Federation;
- may resort to other measures included in the budget legislation of the Russian Federation.
The debt of a constituent entity of the Russian Federation is repaid within a certain time period provided for by the terms of the loan, and cannot be more than 30 years.
The Budget Code establishes that the executive bodies of a constituent entity of the Russian Federation have all the powers to generate cash receipts to the budget of the subject and in order to pay off their debts and funds for.
The public debt is managed by the executive body of the constituent entity of the Russian Federation. This provision is provided for by the Budget Code of the Russian Federation. The Budget Code does not clearly define the concept of debt management.
Analysis of public debt of a constituent entity of the Russian Federation
If we rely on the theory that reveals the content of this concept, then the structure of the public debt of a constituent entity of the Russian Federation includes the following actions:
1) The current state and forecast for the upcoming period of public debt are assessed, taking into account the determination of indicators according to which the amount of debt repayment and servicing is determined.
2) The volume, form and conditions for borrowing funds from the state by a constituent entity of the Russian Federation are determined. Registration of loans is carried out in a certain order.
3) Establishing the volumes and conditions for providing state guarantees to a constituent entity of the Russian Federation in a certain order.
4) Establishing financial control over the receipt of government loans, repayment and servicing of public debt.
5) Preparation and implementation of actions to improve the structure of public debt, including those owned by the state, restructuring of public debt, risk management of government loans.
The Budget Code of the Russian Federation is structured taking into account that the Russian Federation is not responsible for the debt obligations of the constituent entities of the Russian Federation if a guarantee for these obligations was not given by the Russian Federation. Subjects of the Russian Federation and municipal structures are not responsible for their debt obligations if they did not issue a guarantee for them. Repayment and servicing of an internal loan taken from the state is carried out in accordance with the federal laws of the constituent entity of the Russian Federation.
Repayment of public debt includes the following provisions:
a) return of the amount of money borrowed from the city;
b) return of the amount of money borrowed on loans;
c) return of the principal debt on budget loans and budget lending received by the city from financial sources at other levels.
Repayment and servicing of public debt
Servicing the public debt is carried out at the expense of reimbursable expenses of the city’s budget funds associated with the fulfillment of debt obligations. Current expenses include:
a) payment of interest in accordance with the government loan agreement;
b) payment of tax for transactions with valuable government securities;
c) other expenses covering the organization, support of the occurrence and fulfillment of obligations to repay the debt.
Repayment and servicing of public debt is carried out in accordance with financial authorities.
The repayment of public debt is taken into account in the sources of financing deficit budget funds by reducing the amount of financial revenues to repay the deficit. The exception is for state guarantees, for which the guarantee payments lead to the emergence of equivalent claims on the part of the city in relation to the debtor who has not fulfilled the obligation given in the guarantee.
Fulfillment of obligations under state guarantees, for which payments lead to the emergence of equivalent claims on the part of the city to the debtor, are identified as part of the expenditure of budget funds as the provision of budget lending. All expenses associated with covering the debt to the state are identified in the city budget as expenses for servicing the city's debt.
The structure of the public debt of a constituent entity of the Russian Federation involves establishing an order and reflecting in the budgets the receipt of funds from loans and other debts. They are reflected in the budget as sources of covering the budget deficit.
All expenses for payments on debt obligations, including (the difference between the placement cost and the redemption cost of government securities of a constituent entity of the federation) are reflected in the budget as debt servicing expenses.
The state debt of a constituent entity of the Russian Federation involves a process of restructuring and termination of debt obligations by mutual agreement of the parties. Restructuring is carried out through partial write-off or reduction of debt.
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