Putin Orders Government to Shore Up Russia’s Debt-Laden Regions

Aug. 20, 2026 Russia's Finance Ministry. Andrey Nikerichev / Moskva News Agency President Vladimir Putin has ordered the Russian government to stabilize regional finances as local authorities face a combined budget deficit of 1.9 trillion rubles ($22.6 billion) this year. The order comes as the federal government struggles to fill its own budget shortfall, which has reached 6.5 trillion rubles ($77.4 billion). “The stability of regional finances is also the direct responsibility of the federal government and the Finance Ministry,” Putin said at a meeting with senior officials. Finance Minister Anton Siluanov said Russia’s regions currently owe a combined 3.3 trillion rubles ($39.3 billion), equal to about 17% of their own revenue. Around two-thirds of that debt consists of low-interest loans from the federal government. The rest is borrowed on the market and carries much higher interest rates. Putin ordered the government to provide 100 billion rubles ($1.2 billion) to the regions facing the most serious financial problems. But with the federal government itself short of money, Moscow’s main way of supporting the regions has been to forgive some of their federal loans or give them more time to repay. Since the start of the year, the government has written off 518 billion rubles ($6.2 billion) in loans owed by 76 regions, Siluanov said. This reduced their combined debt by 115 billion rubles ($1.4 billion). Regions can have up to two-thirds of their debt to the federal government forgiven, while repayment of the remaining amount can be delayed. The government has postponed repayment of around 100 billion rubles in loans from this year until 2030 and plans similar delays in the coming years. Repayment of one-third of the loans due between 2027 and 2029 will be pushed back to 2031-2033. Siluanov said those delays would leave regional governments with almost 300 billion rubles ($3.6 billion) more to spend over three years. Much of that money, however, is going toward Russia’s war in Ukraine. Siluanov said regions had spent more than 300 billion rubles of the 517 billion rubles in forgiven debt on support for military families and other costs linked to what Moscow calls its “special military operation.” Regional governments are also responsible for paying large signing bonuses to attract soldiers for the war. The average amount regions spend on each signing bonus has risen by 30% over the past year to between 1.8 million and 1.9 million rubles ($21,400-$22,600), said Janis Kluge, a researcher at the German Institute for International and Security Affairs. Based on regional budget data, Kluge estimated that 93,000 people signed military contracts in the second quarter. That would put the total cost of their signing bonuses at around 167 billion rubles ($2 billion). Regional spending on national security rose by 36% year on year between January and April, according to estimates from the Russian Academy of Sciences’ Institute of Economic Forecasting. Housing and utilities spending was the only other major area to record strong growth, rising by 17%. In many cases, such spending is required for regions to qualify for federal debt relief. At the same time, regions reduced spending on the economy and health care, while their interest payments more than doubled, rising 2.4-fold from a year earlier. The regions have received little benefit from recent tax increases because most of the additional revenue goes to the federal budget. Their two main sources of income are corporate profit tax and personal income tax. Personal income tax receipts rose by 14.9% in the first quarter, while corporate profit tax revenue fell by 11.8%, according to the Expert RA rating agency. Growth in personal income tax revenue could also slow as wage growth loses momentum. Economist Vyacheslav Shiryaev has described such debt write-offs as a form of hidden default. “In effect, the regions cannot repay their debts, so the federal government forgives them,” he said. “They are unable to meet their obligations, and Moscow decides to forget about the money.” This article was translated with the help of artificial intelligence and was reviewed by a Moscow Times editor before publication. Learn more about our newsroom's AI policy here. Read this article in Russian at The Moscow Times' Russian service. Read more about: Putin , Regions , Finance Ministry Sign up for our free weekly newsletter Our weekly newsletter contains a hand-picked selection of news, features, analysis and more from The Moscow Times. You will receive it in your mailbox every Friday. Never miss the latest news from Russia. Preview Subscribers agree to the Privacy Policy We sent a confirmation to your email. Please confirm your subscription. 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