The kremlin Is Pushing the federation’s Constituent Entities into the Black Hole of Debt

The financial stability of russian regions has deteriorated sharply. In 2025, the cumulative deficit of regional budgets reached $19.2 billion – 3.6 times more than a year earlier ($5.3 billion). The number of entities with deficits increased from 50 to 74 out of 89.

The largest absolute gaps were recorded in moscow ($3 billion), yamalo-nenets ($1.1 billion), and khanty-mansi ($0.9 billion) autonomous districts. In relative terms, the worst situation is in kemerovo, vologda, and arkhangelsk regions, where the deficit reaches 34–35%.

The main driver of the gap is a 9% increase in expenditures to $313 billion. At the same time, income tax revenues fell by 9% ($6.4 billion) in 55 regions. Commodity producers were hit the hardest: the komi republic – minus 50%, orenburg region – minus 40%, and the yamalo-nenets district – minus 39%. This is a direct signal of

degradation of large industrial companies – former donors to the federal budget.

To plug the gaps, the regions spent almost $13 billion of their $37.7 billion in accumulated reserves. Another 30% of the deficit – $5.8 billion – was covered by bank loans. The federal debt of the constituent entities of the federation reached 3.5 trillion rubles – the highest level in 15 years. Bank borrowing tripled: from 227 billion rubles in 2024 to 676 billion in 2025. At the beginning of 2026, 37 regions had commercial loans; 17 of them took out loans for the first time simply for operational needs.

At this, moscow is methodically restricting regions’ access to preferential financing, forcing them to borrow from commercial banks at market rates. The cost of servicing regional debts has already increased by 38.8% to 23.9 billion rubles. The beneficiaries of the scheme are banks linked to oligarchic groups and putin’s environment.

The costs of the war against Ukraine, in particular “bonus” payments to contract soldiers, have become a separate burden. Combined with sanctions, falling energy prices, and artificially inflated central bank rates, this is ultimately undermining the investment potential of the regions. The use of reserves is a temporary measure: once the safety cushion is exhausted, the subjects of the federation will become completely dependent on federal subsidies. According to analysts’ estimates, the situation will only worsen in 2026.