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With a pillow in hand: how Russian regions make money on budget balances | Articles

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For the first six months of 2022, the subjects of the Russian Federation earned twice as much from the placement of cash reserves than for the entire 2021. Management of budget balances brought a total of 85.13 billion rubles of profit in the first half of 2022. This amount is twice as much as for the whole of last year, reported in the Federal Treasury. How it happened, who is in the leaders and outsiders of the list and how successful this result is, experts interviewed by Izvestia explain.

Too little

Among the five most successful regions were: Moscow region (6.14 billion rubles), Chelyabinsk region (4.89 billion rubles), KhMAO (4.57 billion rubles), Lipetsk region (3.07 billion rubles) and Perm region (2 .96 billion rubles). The list is closed by the Ulyanovsk region (32 million rubles), the Magadan region (4.4 million rubles) and the Omsk region (1.2 million rubles). The federal budget also turned out to be successful in managing budgetary balances – 137.1 billion rubles were received in January-June 2022, which is 1.5 times higher than last year. The total balance of regional and municipal money amounted to 1.7 trillion rubles, the total amount of money – 5.48 trillion rubles.

The situation may be related to several factors, says Olga Belenkaya, Head of the Macroeconomic Analysis Department of FG Finam. Including with a surplus of regional budgets for 2021. According to the Ministry of Finance, the total surplus of the consolidated regional budgets in 2021 amounted to 640 billion rubles.

— According to ACRA, regional budget revenues for the first five months of 2022 grew by 29% (yoy), which can be attributed to the growth of income tax revenues for exporters and the effect of high inflation, while the surplus approached 1.4 trillion rubles and exceeded the positive result of the five months of last year almost tripled. The second factor is the growth of yields on placement of budget funds balances due to a significant increase in the key rate of the Central Bank of the Russian Federation at the end of February, which affected both bank deposit rates and money market instruments. And the probable third factor is the improvement in the administration of income from the allocation of budgetary funds within the framework of a single treasury account, the analyst explained.

billsPhoto: Izvestiya / Dmitry Korotaev

According to the expert, this is an additional “recharge” for the budgets of the regions, which can be used to finance current expenses.

“At the same time, additional income from the placement of balances is too small as a percentage of the planned total income of regional budgets to significantly affect the financial position of regional budgets. For example, for Khanty-Mansi Autonomous Okrug and the Chelyabinsk region – around 2%, for other regions – even lower, she clarifies.

According to the analyst’s forecast, in the second half of the year, most likely, the situation with income from the placement of balances will worsen.

— Budget surpluses will decrease as the economy slows down, the center and regions will increase spending to support the economy, and placement rates have already dropped significantly (the key rate of the Central Bank of the Russian Federation has decreased from 20% to 8%) and, most likely, will continue to decline until the end of the year , — summarizes Olga Belenkaya.

money makes money

Once again, the difference between the poor and rich regions of Russia has clearly become clear, comments Ekaterina Kosareva, managing partner of the VMT Consult analytical agency.

— The difference in income from placed funds on balances — 6.14 billion rubles for the Moscow Region and 1.2 million rubles for the Omsk Region — is colossal. The last figure is generally easier to take for a financial pillow of one person, but not the income of the region, she noted.

Income directly depends on the amount of placed funds, she continues. Accordingly, the more money a region has in its account in the treasury, the more income each invested ruble will bring.

– Thus, it is easier for rich regions to get rich. And the poor are pulling down modest budgets. So far, there are no prerequisites for the situation to change qualitatively,” Ekaterina Kosareva sums up.

growthPhoto: Izvestia/Alexander Kazakov

What to rejoice

The regions of the Russian Federation place free funds on a single treasury account, and the funds are placed at the key rate of the Central Bank of the Russian Federation, explains Artem Tuzov, Executive Director of the Capital Market Department of IC IVA Partners.

“Therefore, it is not surprising that the regions earned many times more than in 2021. The key rate at the beginning of the year was raised to 20% per annum, and the regions themselves could not quickly direct free funds to planned projects, since the external environment had changed. Therefore, for several months, funds that could not be used for their intended purpose were placed at the key rate of the Central Bank of the Russian Federation, the analyst explains.

According to the expert, during the crisis, free funds should work for the benefit of the region and its economy.

– The funds turned out to be free, since part of the funds under the sanctions could not be effectively used. Prompt measures are needed, including from the side of the government, if possible, use the funds, taking into account the sanctions. Otherwise, they will lie in treasury accounts for a year and will not come to the region, – the source of the publication believes.

The analyst stressed that this news once again shows that, despite the crisis, there are funds in the country.

– The main task now is to bring them to the real economy. Foreign investors are leaving the regions. And here they are, the funds that can be directed to solving this problem. But this money cannot be used due to budgetary rules,” adds Artem Tuzov.

bank of russiaPhoto: Izvestia / Pavel Volkov

Risk of overeating

There are two main reasons that the regions earned more on the placement of cash reserves than in 2021, says Dmitry Zemlyansky, Director of the Research Center for Spatial Analysis and Regional Diagnostics at the Institute for Applied Economic Research (IPEI) of the RANEPA.

The first is significant balances on the accounts of the regions at the end of last year, when there was a sharp increase in tax revenues in the regions, especially in income tax. As a result, the constituent entities of the Russian Federation ended the year with a large excess of actual income over expenses. In the first half of 2022, revenue growth continued, although it slowed down. At the same time, costs are rising at a slower rate. Accordingly, the base for income from balances in the regions has grown. The second reason is that after the increase in the key rate by the Bank of Russia, most commercial banks sharply increased interest rates on deposits in March-April. This also ensured the growth of income from balances, a significant part of which lies precisely on deposits in banks, the specialist explained.

However, there should be no dizziness from success, the expert warns.

— Firstly, deposit rates are gradually returning to the previous level. Secondly, the “pillow” can be quickly eaten – it depends on the policy of each particular region, – concludes the interlocutor of Izvestia.

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