“Compensate for the decline in income”: the Russian government freed the regions from payments on budget loans in 2020

The Russian government adopted a resolution on the exemption of regions of the country from payments on budget loans in 2020. The corresponding document was published on Tuesday, May 5, on the website of the Cabinet.

“In 2020, the regions are completely exempted from paying off debt. In 2021–2024 they will pay 5% of the debt annually, in 2025–2029 they will pay the balance in equal shares with the possibility of early repayment, ”the explanatory note says.

As expected in the government, the regions freed up in 2020 will be able to direct funds to eliminate the consequences of the spread of coronavirus. Moreover, the decision of the Cabinet will compensate for the reduction in tax and non-tax revenues, as well as ensure the sustainability of regional budgets.  

“The budgets of the regions were agreed last year and, of course, did not provide for the situation with the coronavirus. Expenses are always made based on budget plans, and revenues are planned based on experience from previous periods. Now the regions have to find additional funds to fight the infection, as well as to support the population and business. As a result, there is a cash gap in regional budgets, and the number of subsidized constituent entities of the Russian Federation can grow. Therefore, the government took such a measure, ”explained Artyom Deev, head of the AMarkets analytical department, in an interview with RT.

In many respects, the decision to free the regions from payments on budget loans was expected, said Vasily Karpunin, head of the BCS Broker stock market experts department. According to him, the adopted initiative is one of the alternative ways of donating funds.

“The measures taken will ensure the stability of regional budgets and prevent situations where some of the most problematic entities will have to provide direct support because of the inability to fulfill obligations in the face of falling incomes. As of April 1, the volume of budget loans to regions from the Russian budget system amounted to 984 billion rubles, and the total state debt of the country's subjects - 2.055 trillion, ”Karpunin said in an interview with RT.

According to the latest data, in Russia the number of detected cases of coronavirus infection COVID-19 exceeded 155 thousand people. As previously stated by the head of the Ministry of Economic Development Maxim Reshetnikov, as a result of introduced restrictions, the Russian economy loses about 100 billion rubles every day. Against this background, according to the Central Bank, from April to June, the country's GDP may decrease by 8%.

In general, according to the forecast of the Central Bank, according to the results of 2020, the Russian economy may lose 4-6%, after which it will begin to recover and will grow by 3-5% in 2021, and by 1.5-3.5 in 2022 % At the same time, according to the head of the Bank of Russia Elvira Nabiullina, in 2020, against the background of increased spending and reduced revenue from the treasury, the Russian budget deficit may amount to about 6% of GDP.

At the same time, in the current conditions, the authorities do not plan to reduce the amount of budget expenditures. This was previously stated by the Minister of Finance of Russia Anton Siluanov. Moreover, according to him, if necessary, the spending of the treasury to combat the consequences of the coronavirus can be further increased.

“There are resources for this. And this justifies the policy that we previously pursued to accumulate reserves in the budget, ”Siluanov said on the Russia 24 television channel.

According to Russian Prime Minister Mikhail Mishustin, in total, the Ministry of Finance reserved 1.4 trillion rubles, or 1.2% of GDP, for an anti-crisis plan to combat coronavirus. This was stated by the head of the Cabinet at the meeting of the government with the president in early April. 

The authorities have already allocated 2 billion rubles to provide subsidies to small and medium-sized businesses in the country's constituent entities. The corresponding order was published on the website of the Cabinet on May 4. At the same time, earlier, Vladimir Putin ordered an additional 200 billion rubles to be allocated to the regions to support citizens and enterprises. 

“Due to the halt of economic processes in the subjects of the country, such a source of income as paying taxes will also decrease. And for this, additional funds will also be needed. In part, these shortfalls in income will be offset by direct financial support to the regions in the amount of 200 billion rubles. The release of regions from payments on budget loans this year and installments for a long period in subsequent years will free up more than 70 billion rubles, which the regions can use to eliminate the consequences of COVID-19, ”concluded Artyom Deev.