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Russia Faces $10.5 Billion Regional Budget Deficit as 65 Regions Prepare Spending Cuts
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Around 65 Russian regions are planning to reduce spending on investment and infrastructure projects between 2027 and 2029 as stagnant revenues, rising financial obligations, and war-related expenditures put increasing pressure on local budgets, according to Ukraine’s Foreign Intelligence Service (SZRU) on October 20.
The agency reported that regional authorities are being forced to scale back planned construction, infrastructure modernization, and investment programs as available funds become insufficient to cover social payments, public institutions, and expenditures associated with Russia’s war against Ukraine.
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Among the regions preparing budget reductions is Tatarstan, which plans to cut spending by 13% in 2027, bringing its budget to approximately $6.6 billion.
The Leningrad region is expected to reduce expenditures by 2.9% to $3.5 billion, while Yakutia plans a 2.7% reduction to approximately $4 billion.
According to Ukrainian intelligence, the reductions will primarily affect investment initiatives, repairs, and modernization of municipal infrastructure, potentially leaving local development projects without sufficient funding.
The financial pressure is also reflected in Russia’s broader regional budget projections.
According to forecasts from Russia’s Finance Ministry cited by SZRU, regional budgets are expected to generate approximately $331.4 billion in revenue in 2027, against projected expenditures of $342 billion. This would leave Russia’s regions facing a combined budget deficit of approximately $10.5 billion.
At the same time, Ukrainian intelligence reported that Moscow continues to transfer additional responsibilities to regional authorities without providing corresponding financial resources. As a result, local administrations must finance these obligations from their existing budgets, redirecting funds originally allocated to other programs.
The federal government is also reportedly preparing changes to financial assistance for economically weaker regions, potentially further restricting their access to budgetary support.
Under the proposed arrangements, Dagestan, Tuva, Ingushetia, and Altai Krai would be guaranteed no more than 90% of the subsidies allocated under existing budget legislation in 2027, rather than receiving the full amount with indexation.
Additionally, SZRU noted that even partial debt relief on regional budget loans would come with restrictions requiring local authorities to spend the freed-up funds on priorities established by Moscow.
Russian regions are losing control over their financial resources as their budgets become increasingly dependent on decisions made by Moscow. The Kremlin continues to dictate how funds are distributed, leaving local authorities with fewer resources to address pressing regional issues.
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The growing financial pressure on Russia’s regions comes amid broader strains on the country’s federal budget, which have also prompted the Central Bank to draw down its gold reserves.
According to The Moscow Times on October 20, Russia’s Central Bank has been selling gold from its reserves for ten consecutive months to help cover a widening federal budget deficit, projected to reach 7.3 trillion rubles ($81.1 billion) this year, twice the amount initially anticipated.
The latest reduction brought the country’s total gold reserves to 72.8 million ounces, their lowest level since late 2019.
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