Russia, Moscow imposes spending review on Chechnya and occupied regions of Ukraine

A resolution from the Russian Finance Ministry attributes direct responsibility for the budget deficit to the local governments of Chechnya, Ingushetia, Tuva, and the administrations installed by Moscow in the occupied regions of Ukraine and asks them for a commitment, to be formalized by December 18 , to fill the imbalance between spending and revenue in order to continue receiving aid from Moscow.

The budget forecast for the three-year period 2024-2026 approved by the Russian Parliament is certainly not dominated by subsidies for these eight regions. The dominant figures are national defense expenditure, to which a record amount equivalent to 120.8 billion dollars is allocated, and classified expenditure, equal to almost 27 percent of the total.

According to what Kommersant anticipates, federal subsidies to fragile regions will therefore be conditional on their leaders’ efforts to bridge the financial imbalance. Otherwise, local leaders will be left with no choice but to go into debt with foreign institutions and countries.

In two of the last three fiscal years, federal subsidies have been more than 40 percent of these regions’ revenues. In Chechnya in particular, where Moscow bought peace with subsidies for reconstruction and stability, with increasing spending over the years, which fueled Ramzan Kadyrov’s regime, the news will certainly not be welcomed, as underlined by analyst Ilya Grashchenkov.

The Court of Auditors estimates the possible federal deficit at 1.3 billion in 2024, 1.5 billion in 2015 and 1.7 in 2026. But things could be much worse, according to forecasts by private analysts. Tax increases on businesses and citizens are considered inevitable. The draft resolution from the Ministry of Finance seems to lay the foundations rather than for a tightening of the purse strings, yet to be demonstrated, for new political choices.