REUTERS
Russia is facing an increasing likelihood of federal government default in 2-3 years resulting from huge regional government debts, Ukrainian newspaper Europeiska Pravda reported with reference to Bloomberg citing Standard&Poor's (S&P) analysts.
In particular, debt load of Russia’s more than 80 regions has doubled to RUR 2.4 trillion ($42 billion) in the past five years, according to Bloomberg.
Analysts note that strains on region finances will grow critical in two or three years, raising the risk of bailouts from a federal budget already running a deficit for the first time since 2010.
"Right now the federal center has an opportunity to help regions. In three years, there may be fewer resources, while regional debt may be bigger, and that will result in greater risks," said Karen Vartapetov, associate director of S&P’s Moscow office.
According to experts, threats to municipal finances are growing as sanctions over Ukraine choke access to capital markets, forcing local governments to fund social spending with costlier bank loans.
At the same time, experts note that even the existing access to market sources of financing may be partly closed for some Russian regions over time.
These regions may also have difficulties with refinancing the existing debt, because banks are becoming more selective in assessing regional risk.
Chukotka, a federal subject of Russia, is said to be the most problematic region with the debt equal to 144% of its revenue.