Financial Collapse of Regions: moscow Once Again Bails Out Federal Subjects from Own Debts

The government of the rf has written off budget arrears for six more regions, totaling 37.5 billion rubles ($525 million). The mechanism applies to the republic of sakha (yakutia), the republic of tatarstan, the khabarovsk territory, as well as vladimir, kurgan, and omsk regions. This latest debt “gift” from moscow is an acknowledgment that the rf’s regional finances are falling apart at the seams.

The ministry of finance of the rf forecasts that the cumulative deficit of regional budgets in 2026 will reach 1.9 trillion rubles ($26.6 billion). More than 20 federal subjects have already been officially recognized as financially distressed. The reasons are standard: declining tax revenues, rising social spending, and the increasingly heavy burden of military expenditures, which the federal government is shifting onto the regions.

Debt write-offs have long become the norm. In 2025, 58 regions resorted to this mechanism, reducing their debt portfolios by approximately $3.2 billion. In 2026, 54 regions had already shed another $2.4 billion in obligations. In fact, the kremlin is forced to grant a massive financial “pardon” to its own constituent entities every year to prevent them from declaring default on live television.

The situation reflects the regions’ structural dependence on the federal center, which is only deepening amid the war. The regions’ own revenue base is not growing, expenditures are not being cut, while the war economy is draining resources faster than they can be replenished. Writing off debts provides regions with short-term relief but does not address any of the causes of the crisis.