• Regional deficits driven by lower profit tax revenues and higher social, war-related spending
• Finance Minister urges minimizing costly commercial debt and working to cut deficits
• Putin supports debt relief for regions
• Putin aide says economic situation is complicated

The combined deficit of Russian regional budgets will grow by 27% to ‌1.9 trillion roubles ($25.4 billion) in 2026, largely due to lower corporate profit tax revenues and higher social spending, Finance Minister Anton Siluanov warned on Monday.

The regional budgets bear a significant share of spending linked to the war in Ukraine, such as payouts to war volunteers and their families, and regional debt is rising.

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Profit tax revenues, which account for up to a third of total regional budget ⁠income, have been hit by Russia’s economic slowdown, which started in 2025. According to the latest available data for January, corporate profits fell by ​almost 30% year-on-year, as many companies report lower profits or losses.

“The situation with the regions’ budgets is challenging,” Siluanov told a hearing at the Federation Council ​upper house of parliament. He said the biggest deficits arose in regions that had traditionally been running budget surpluses.

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Siluanov said that the regions’ debt as a share of revenues grew by one percentage point to 19% in 2025, as the regions were financing their deficits with bank loans at current high interest rates.

“Our task is to minimize commercial ​debt. Today, it is costly,” he said. The Russian economy slowed sharply to about 1% growth last year from 4.9% growth in 2024 and contracted in ​January in February this year due to high interest rates, tax hikes, a strong rouble and weak prices for Russian oil at the start of the year before the war ‌in the ⁠Middle East.

Russia’s oil and gas revenues are seen falling in the first five months of this year, Reuters calculations show.

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