President Vladimir Putin has directed officials to address a 1.9 trillion ruble regional budget deficit as local governments struggle with debt and rising military-related costs.

Russian President Vladimir Putin has ordered the federal government to stabilize regional finances as local authorities face a combined budget deficit of 1.9 trillion rubles ($22.6 billion). The directive arrives as the federal government manages its own 6.5 trillion ruble ($77.4 billion) shortfall. Putin emphasized that the stability of regional finances is a direct responsibility of the federal government and the Finance Ministry.

Debt Relief and Repayment Delays

Finance Minister Anton Siluanov reported that Russia’s regions hold a combined debt of 3.3 trillion rubles, with two-thirds consisting of low-interest federal loans. To manage this, the government has written off 518 billion rubles in loans for 76 regions since the start of the year. Additionally, the government has postponed approximately 100 billion rubles in loan repayments from this year until 2030, with further delays planned for repayments due between 2027 and 2029.

Impact of Military Spending

Much of the financial relief provided to regions is being directed toward costs associated with the war in Ukraine. Regions have spent over 300 billion rubles of forgiven debt on military-related expenses, including support for military families and signing bonuses for new recruits. According to researcher Janis Kluge, the average regional signing bonus has risen by 30% over the past year, reaching between 1.8 million and 1.9 million rubles.

Regional Budget Pressures

Regional spending on national security increased by 36% year-on-year between January and April, while interest payments on debt rose 2.4-fold. Meanwhile, regions have reduced spending on health care and the economy. While personal income tax receipts rose by 14.9% in the first quarter, corporate profit tax revenue fell by 11.8%, leaving regions with limited benefit from recent tax increases.