Journal section "Public finances"

Execution of local budgets in 2014: tension is not decreasing

Povarova A.I.

2 (38), 2015

Povarova A.I. Execution of local budgets in 2014: tension is not decreasing. Economic and Social Changes: Facts, Trends, Forecast, 2015, no. 2 (38), pp. 187-210. DOI: 10.15838/esc/2015.2.38.12

DOI: 10.15838/esc/2015.2.38.12

Abstract   |   Authors   |   References
Vladimir Putin’s “May decrees” have received the status of a national goal. On the background of decreasing economic performance exacerbated by external shocks, the implementation of these decrees has become a heavy burden for regional budgets without an adequate financial support from the federal budget. As a result, almost every Russian region has suffered losses by the end of 2014. The fallacy of the ongoing course of budget policy has long been criticized by many leading scholars and experts; moreover, they proposed positive recommendations on the development of alternative policies. Unfortunately, the results of 2014 prove that the RF Government has not abandoned the policy of budget consolidation. On the contrary, gratuitous financial assistance to the regions is actively transformed into debt financing in the form of budget loans. However, the regional authorities can rely on this quasi-support, which is a temporary factor, only provided that the budget is deficit-free and at the expense of abandonment of spending on economic development and on the improvement of welfare of the population. The results of the analysis of the facts indicate that the budget-related problems of the regions, arising largely from the inefficient federal budget policy, have reached the critical level. One fourth of the subjects that had a predominant share of market debt turned out to be in a pre-default state. The breakdown of public finances has affected the most prosperous regions, which is contrary to the paradigm of sustainable regional development. The regions entered the crisis of 2014 with huge debt and budget deficit; the situation was not so grave during the financial and economic crisis of 2009. In terms of the upcoming 10% cut of federal budget expenditures [5], the subjects of the Russian Federation can hardly expect an increase in financial support. They will obviously have to adapt their budgets to the changing economic situation. But in such conditions, when there are no opportunities to reduce investments, spending on housing and utilities and on the economy, the compensational sources can be found only in the budget sector and the existing measures of social support; such a situation will cause the reduction of domestic demand, creating not only economic but also political risks for the regional authorities. The article analyses the execution of budgets of the RF subjects for 2014, substantiates practical recommendations for the stabilization of territorial budgetary systems and proposes measures to lead them out of the crisis. The study is based on the official data of the Ministry of Finance of the Russian Federation [7], the Federal Treasury [8], the Federal Tax Service [9], and the Federal State Statistics Service [10]


region, public debt, deficit, loans, territorial budget, adjustment of budgetary policy

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