Coronacrisis leads to budget deficits in two-thirds of Russia's regions

The reasons for the negative trend for 58 of the 85 Russian regions are the COVID-19 pandemic and the decline in oil prices

Coronacrisis leads to budget deficits in two-thirds of Russia's regions
Photo: Rinat Nazmetdinov

As Realnoe Vremya found out, having studied the latest reporting data of the Treasury, Russia executed the budget of 2020 with a record deficit of 676,6 billion rubles over the past 5 years (the consolidated budgets of the country's constituent entities were considered, with the exception of the budgets of territorial state extra-budgetary funds). Two-thirds of the country's regions showed an excess of expenses over income. Tatarstan also finished the year with a deficit in the face of rising incomes in the pandemic.

Regions execute budgets with maximum gaps

According to the Treasury data, Russia executed the 2020 budget with a record deficit of 676,6 billion rubles (the calculation included data only on the consolidated budgets of the regions, with the exception of the budgets of territorial state extra-budgetary funds). For comparison, the worst for the last five-year period before that was the year 2017 with a deficit of 51,9 billion rubles, and 2019, on the contrary, was profitable — revenues exceeded the expenditure part by 4,7 billion rubles.

The share of Russian regions with a budget deficit increased from 41,2% (35 subjects) in 2019 to 67,1% (57 subjects). According to Andrey Margolin, Professor at RANEPA, director of the Institute of Finance and Sustainable Development, in 2020, one of the reasons for the negative trend is a large number of unforeseen expenses related to countering the coronavirus pandemic, which needed to be funded:

“Among the sources here are stabilisation funds, additional placements of government bonds. If there is a drop in GDP by about 3-3,1%, the state has not reached the planned income, a deficit formed. If we compare these figures with other countries in the world, Russia looks quite decent. No one knew about the pandemic when the budget was planned, force majeure. There is nothing terrible," Margolin is sure.

Most of all, the consequences of the coronacrisis affected the situation in the economically active Central Federal District. It accounts for almost a third (32,3%) of the Russian treasury's deficit. The centre of the “funnel”, as expected, is Moscow (135,9 billion rubles) and Moscow Oblast (87,8 billion rubles). Moreover, the latter spends more than the earned income for 4 years and finished the year approximately like the entire North-Western Federal District (90,5 billion rubles)

The three regions with the most deficient treasury (not only the Central Federal District, but also the whole of Russia) are round out by Kemerovo Oblast, Kuzbass, with a deficit of 41,7 billion rubles, which is more than the Far Eastern Federal District (35,4 billion).

The maximum budget deficit in the Volga Federal District at the end of the year was shown by Bashkortostan with 37,3 billion rubles. The republic, led by Radiy Khabirov, increased the deficit more than twofold compared to the previous year (16,3 billion rubles). Although even earlier, the revenue part of the budget exceeded the expenditure part.

Perm Oblast has the second largest shortage of funds in the treasury after Bashkiria with a 22,5 billion rubles deficit. Until 2021, the region was in surplus for 3 consecutive years.

Tatarstan round out the top three regions of the Volga Federal District with a significant deficit budget (21,9 billion rubles). For the first time in 5 years, the republic has shown such a result.

What are the reasons for Tatarstan's deficit?

Let's study in detail the revenue and expenditure parts of the executed consolidated budget of the republic. For example, in 2020, Tatarstan's revenues increased, despite the crisis, and amounted to 341,2 billion rubles. A year earlier, it was 337 billion rubles.

Nikita Krichevsky, an economist and publicist, specialist in the field of public administration of the economy, finance, risk management and social security, commenting on this trend, said:

“Incomes have grown not only in Tatarstan. In Moscow, revenues from small and medium-sized businesses increased by 7% last year. Rumours of the death of small and medium-sized businesses have been greatly exaggerated. Moreover, with the gradual lifting of restrictions in the third quarter, all consumer sectors — services, catering, hotels, restaurants, consumer services, transport and others — showed an explosive growth of two to three times. Both the third and fourth quarters of the year allowed us to offset the negative effect of the second quarter. This was due to state support, among other things, but there is also the psychology of the entrepreneur: they are looking for new ways to stay afloat and develop. For example, if we look at January 2021, compared to January last year, as for public catering, the number of establishments that work through delivery in cities with millions of people has more than doubled.”

The expenditure part of the Tatarstan budget (executed expenditures in 2020 — 363,2 billion rubles), although it was lower than the approved one (376,6 billion rubles), still significantly exceeded the previous year's figure by 41 billion rubles.

What is included in the “over-spent” billions of rubles? As expected, the first line is occupied by Healthcare with an increase in spending by 11,8 billion rubles. Spending on “social policy” (+8,8 billion rubles) and “national economy” (+7,1 billion rubles) increased. Andrey Margolin also noted that Tatarstan has increased spending on health care and national economy:

“In the conditions of lockdown, various businesses suffered, the state was forced to support them, increasing costs. This is a kind of inevitability, we should have financed it. Tatarstan is very stable, it has a good economic situation, it can afford such deficit. It is caused not by that something was done wrong but by a certain inevitability that appeared for reasons beyond the control of those who make such decisions," said the RANEPA professor.

In 2020, Tatarstan's revenues increased, despite the crisis, and amounted to 341,2 billion rubles. Photo:

Who doesn't care about the crisis?

Among the regions of Russia that finished the year with a budget surplus, there are Voronezh Oblast (8,5 billion rubles), Altai Krai (5,9 billion rubles) and Krasnoyarsk Krai (4,9 billion rubles).

At the same time, Voronezh Oblast has been a region with a surplus treasury for 5 years and increased the figure from 1,5 billion rubles in 2019. The budget of Altai Krai also traditionally has revenues that exceed expenditures.

“Of course, there is not enough money in the budget, but there are many reserves to reduce the budget deficit. Another question is that the current budget has the form of a law, and it will have to be implemented, like it or not. And for the future, the budget will be cut at the expense of inefficient items. But why there is not enough money — the crisis, pandemic, economic downturn, decrease in tax receipts. At the same time, if not for the super-efficient work of the Federal Tax Service, the budget hole would be significantly larger. In previous years, with the economy growing by 1,5-1,6% (2017-2018), the incomes, for example, for personal income tax increased by 20%, and social contributions — by 10%," said Nikita Krichevsky.

According to him, the effectiveness was also shown by the ASK NDS-2 system, which “records the gap in VAT in online mode and puts a barrier in the way of classic cashing out”. The economist also sees no serious problems in the budget deficit, as long as it is within the limits of inflation: “If it is 4-5 per cent, there is nothing wrong with that, these revenues will be collected within a year. How will we do this time [this year]? Most likely, the deficit will remain, but it will not be as large as it was," the source concluded.

By Yevgeny Khramov