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

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