Economic Analysis - Regional Balance Sheets A Long-Term Threat - 18 DEC 2017
BMI View: Unsustainable debt burdens in many of Russia ' s re gional government balance sheets will threaten l ong-term fiscal sustainability , weigh on economic growth , and lead to a shake-up of the political status quo .
Russia boasts a robust fiscal position both at the federal level and on aggregate at the regional level. That said, a rising number of regional governments are turning to the Kremlin for financial support in light of rising debt burdens, highlighting a growing disparity among regional balance sheets since the 2015-2016 economic downturn. The Kremlin is offering support by launching a regional government debt restructuring programme, which in our view risks simply kicking the can down the road. A failure to address the root causes of these regions' unsustainable fiscal trajectories - which include fund mismanagement, sluggish economic growth and limited flexibility - will lead to further indebtedness in the long run, hindering the growth trajectory of the broader country while challenging the political status quo.
Growing Divergence Among Regions
|Reaching Unsustainable Levels|
|Russia - Public Debt-to-Revenues Ratio Of The 10 Most Indebted Regions, %|
|Source: Ministry of Finance, BMI|