Debt extension

For the first time in 10 years, the structure of the state debt of the Russian regions has changed - they have more bond issues and fewer bank loans. The amount of debt also became less.
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According to the review of regional finance of the rating agency ACRA, the share of bonds in debt increased from 19% to 24%, while the share of bank loans, on the contrary, decreased from 34% to 29%. The size of the regions' debt on bonds (549 billion rubles as of January 1, 2018) was a record since 2010. The volume of placements in 2017 (199 billion rubles) was a third more than a year earlier.
According to Kommersant, the regions began to more actively borrow through the issuance of securities due to lower interest rates and the desire to fix cheap debt for a long period. The publication notes that even those regions that had not previously resorted to this type of loans, or did it for a very long time - Karachaevo-Cherkessia, Nenets Autonomous Okrug, Kursk, Orel, Saratov, Ulyanovsk Regions and St. Petersburg entered the bond market.
Analysts say that by the end of 2017, the total national debt of the regions decreased by almost 40 billion rubles (-2%) - from 2,353 to 2,315 trillion rubles.Fitch agency stresses that this happened for the first time in 10 years and is largely due to the fact that the budgets of 45 regions in the past year were in surplus. Earlier, the size of the state debt of the subjects of the federation grew on average by 23% per year. Only in 2016, the growth rate decreased to 2%.
“The improvement in the budgetary performance of the regions in 2017 is due to a reduction in spending and revenue growth, primarily due to the resumption of growth in corporate income tax collections against the background of economic recovery,” says Fitch.
Considering the almost uncontrolled growth of regional payables, a reduction in government debt in the Russian government is called a success. At the same time, the growth of bonded loans can hardly be called a problem, since it was the Ministry of Finance that set up the regions for such a development scenario: reducing the use of budget and bank loans and increasing long bond issues.
However, the federal center has helped some of the regions directly. So, according to the results of 2017, the territories allocated 334 billion rubles from the federal budget. At the same time, the law on the budget stated that support measures would amount to 200 billion rubles.
Most of the difference is loans that are repaid ahead of schedule due to a breach of obligations to the Ministry of Finance and returned to the regions in the form of new loans for five years, followed by restructuring. As a result, many regions of the federation with high debt burden received money that will be for seven years, which partially relieves them of both the refinancing risk and the interest burden, Fitch analysts say.
According to the calculations of the rating agency, the total deficit of regional budgets before the movement of debt was at the level of less than 1% of the total income of the regions in 2017. Now experts expect further consolidation of budget indicators and maintaining the overall regional debt at a moderate level (about 25% of total revenues).
However, analysts pay attention to a serious imbalance in debt levels - against the background of a reduction in the aggregate indicator for 31 regions in 2017, it still grew. Fitch also worries about the possibility that "debt reduction in 2017 could be partly due to an increase in accounts payable, which is not visible in the official accounts."
According to the agency RIA "Rating", in 2017 in the 49 regions of Russia the volume of public debt decreased.Moscow (-27.5 billion rubles) and the Chelyabinsk Region (-12.9 billion rubles), as well as four more regions, whose national debt decreased by 5-8 billion rubles, made the largest contribution to the reduction of total debt. But their efforts were partially offset by the growth of the state debt of St. Petersburg (+21.1 billion rubles) and the Republic of Mordovia (+9.8 billion rubles).
The reduction of public debt took place against the background of the growth of revenues of the budgets of the subjects of the Russian Federation. At the end of 2017, the total amount of tax and non-tax revenues of all constituent entities of the Russian Federation grew by 9.1%, while the reduction was recorded in 15 regions. The volume of total expenditures of the budgets of all subjects of the Russian Federation grew by 9.2%.
In seven regions, the volume of public debt exceeds own budget revenues: this list includes Mordovia, Khakassia, Kostroma region, Karelia, Kabardino-Balkaria, Oryol and Pskov region. Experts called these regions an “outsider seven”, but noted that last year there were eight such regions of the country.
Vladimir Norin, Ph.D. (Econ.), Associate professor at the Department of Public Administration, Far Eastern Institute of Management, RANEPA, estimates the change in the structure and amount of public debt in the regions:Yes, indeed, debts have decreased, because the debt burden on individuals and on small and medium businesses has increased. <...> In this regard, I think that the debt burden on subjects in the Russian Federation will remain the same, and debts have decreased only due to the tax burden on the population. <...> On the one hand, this may be good for the budget, but in the end it can lead to negative pressure on the economy as a whole.
I agree that reporting is distorted. Statistics is distorted to some extent by short-term considerations. In general, the picture is not so rosy. "
Candidate of Economic Sciences, Associate Professor of the Department of World and Regional Economics, Economic Theory of Perm State National Research University Dmitry Gubanov notes that the reality of the ACRA experts' assessment depends on what criteria they were guided by: In this case, the change in the structure of public debt may depend on several macroeconomic parameters. <...> In this regard, it is difficult to say that the concrete by those affected to reduce the cost of debt.The economic situation in the country does not favor the regions to reduce debts due to rising incomes. <...> The reason that the rating agency ACRA calls is associated with long bond issues. This may indeed be the case, since bond loans are theoretically cheaper than bank loans, so this allows you to save on cash interest and reduce debt. Reporting could also have an effect on debt reduction, because sometimes being able to report well is perhaps even better than doing something well. "
Oleg Tolstoguz, Ph.D. subjects are subject to strict performance requirements, up to and including the withdrawal of subsidies in the event of non-fulfillment of obligations. a mandatory requirement for the RF subjects.<...> I stress once again: the main reason for the reduction of debts of Russian regions in 2017 and the change in their structure is related to the tough policy of the Ministry of Finance. <...> Regions are forced to look for ways to reduce debts, which is why someone else can, as he can, reduce them. Bonds are a rather risky and conditional thing for the regions. In some regions of the Russian Federation, it "comes in", and in some it does not. "
Well, something like this.
The full version of the material with detailed comments of experts can be read here.
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