ILYA SOKOLOV: “THE GOVERNMENT PROVIDES THE REGIONS WITH THE OPPORTUNITY TO SPEND THEIR SPARE MONEY ON HIGH ROI PROJECTS”
Leading researcher at the Gaidar Institute Ilya Sokolov commented to Ura.ru on the government decision to exempt regions from repaying budgetary loans in 2022.
The RF Government provided the regions with the opportunity to maintain their ongoing regional utility infrastructure modernization projects and to adjust their economies to the new conditions. This decision was announced by Prime Minister Mikhail Mishustin at the meeting of the Presidium of the Government Commission on Enhancing Economic Resilience to Sanctions on May 31.
Mikhail Mishustin outlined, as one of the main tasks, that of supporting the regions and strengthening their financial stability. He went on to announce the government resolution whereby they now can restructure their payments under the budgetary loans they have taken out. The deferment may apply to 100% of this year’s payments, with only 5% per annum payable during the next two years (2023-2024). Thereafter, from 2025 to 2029, deferred payments can be made in equal instalments within five years. Early repayment of the debt is also possible. The press service of the RF Government specified that the funds released as a result of loan restructuring can be invested in infrastructure facilities.
Ilya Sokolov confirms that the government has given the regions an opportunity to invest their free funds in projects offering high returns on investment. “The higher the debt obligations, the higher the cost of servicing them. Most regions are traditionally short of money, and they always welcome a reduction in their debt burden. But the consequences of the sanctions have not yet become manifest in the economy. So, there is a risk that RF subjects, being forced to take loans from banks at sky-high interest rates, may get into huge debt, as was the case in the mid-2010s. The authorities do not want to commit the same mistake twice,” said the Gaidar Institute expert.
Mikhail Mishustin outlined, as one of the main tasks, that of supporting the regions and strengthening their financial stability. He went on to announce the government resolution whereby they now can restructure their payments under the budgetary loans they have taken out. The deferment may apply to 100% of this year’s payments, with only 5% per annum payable during the next two years (2023-2024). Thereafter, from 2025 to 2029, deferred payments can be made in equal instalments within five years. Early repayment of the debt is also possible. The press service of the RF Government specified that the funds released as a result of loan restructuring can be invested in infrastructure facilities.
Ilya Sokolov confirms that the government has given the regions an opportunity to invest their free funds in projects offering high returns on investment. “The higher the debt obligations, the higher the cost of servicing them. Most regions are traditionally short of money, and they always welcome a reduction in their debt burden. But the consequences of the sanctions have not yet become manifest in the economy. So, there is a risk that RF subjects, being forced to take loans from banks at sky-high interest rates, may get into huge debt, as was the case in the mid-2010s. The authorities do not want to commit the same mistake twice,” said the Gaidar Institute expert.