Debt sustainability of Russian regions: a balanced approach and responsible budget planning

Abstract

The article examines theoretical and practical aspects of ensuring debt sustainability of the constituent entities of the Russian Federation. The relevance of the study is due to the need to find a balance between the use of debt financing for solving socio-economic problems and maintaining a safe level of debt burden. Existing approaches to assessing debt sustainability are analyzed, including the classical approach, Bohn’s approach, and the methodology enshrined in the Budget Code of the Russian Federation. It is shown that the current system of indicators allows fixing the actual level of sustainability but does not provide a comprehensive assessment of the effectiveness of debt policy. Special attention is paid to the problem of soft budget constraints, which manifests itself in the readiness of the federal center to provide transfers to cover deficits and service regional debt. Based on the analysis of the dynamics and structure of public debt of the Russian regions for the period 2006–2023, trends are revealed: substitution of market debt with budget loans, a decrease in the share of bond issues, and growing dependence of regions on federal support. The necessity of transitioning to a balanced approach combining compliance with regulations with a qualitative assessment of debt policy, development of market borrowing instruments, formation of reserve funds, and increased responsibility of regional authorities is substantiated. Directions for improving budget planning are proposed, including factor analysis of the debt burden, linking intergovernmental transfers with sustainability indicators, and more active use of the temporary financial administration procedure