russia’s Budget Crisis Has Reached a Structural Level: 56 Regions Are Already Running Deficits

The surplus of the rf’s consolidated regional budgets in the first quarter of 2026 fell to a five-year low, amounting to just $1.93 billion (140 billion rubles). Data from the rf’s accounts chamber show that russia’s budget system continues to slide into crisis, despite the kremlin’s attempts to portray the situation as stable.

Compared to the first quarter of 2025, the surplus shrank 2.4 times (it stood at $4.63 billion at that time), while compared to the same period in 2024, when the regions had a surplus of $8.61 billion, the decline reached a factor of 4.5. Even more telling is the trend in the number of regions running deficits: there are now 56, compared to 46 last year. By comparison, in the first quarter of 2022, when the rf’s army launched a full-scale invasion of Ukraine, deficits were recorded in only six regions. In other words, over four years of war, the kremlin has driven nearly the entire country to financial ruin.

The combined deficit of the regions in the red nearly doubled over the year, from $2.12 billion to $4.06 billion. Only 34 regions remained in surplus, with a combined positive balance of $5.99 billion, and $3.82 billion of that (64%) went to moscow. The rest of the country is, in fact , surviving on the scraps of the capital’s wealth.

The situation is most difficult in industrial, coal-mining, and resource-extraction regions. In terms of the ratio of the deficit to local revenue, the worst figures are seen in the jewish autonomous region, where the deficit consumed 50.5% of revenue, as well as in kemerovo (50%), vologda (32.9%) regions, and komi republic (32.7%). In absolute terms, the largest budget shortfalls were recorded in kemerovo region ($294 million), the khanty-mansi autonomous okrug ($280 million), and the krasnodar Territory ($275 million).

In 39 regions, the deficit has persisted for the second consecutive year, and in 11 regions, it has continued for a third year. This is no longer a temporary cash shortfall but a structural problem that the kremlin is unable to resolve without external infusions or new tax levies.

Regional revenues grew only marginally, by just 0.5%, to $76.05 billion (a mere 20.7% of the annual target), while expenditures jumped by 4.3%, to $74.12 billion. It is precisely the gap between these growth rates that is creating an ever-deepening deficit.

Local officials are already looking for ways to cut costs. Authorities of irkutsk region have decided to turn off street lighting in a number of public spaces to at least partially plug the budget hole, which had reached 46.4 billion rubles by the end of 2025. The lights are being turned off even in bratsk, the region’s second-largest city with a population of over 200,000. While the kremlin spends billions on the war, russians in the provinces are left in the dark.

The structure of revenue is also changing – and not in the russians’ favor. Personal income tax revenue rose by 14.6%, to $23.46 billion, while corporate income tax revenue fell by 11.7%, to $19.05 billion. This means that the kremlin is shifting the budgetary burden from businesses to ordinary citizens, while businesses are simply stopping payments because they cannot afford to pay. In kemerovo region, revenue from businesses plummeted by 40.8% due to low export prices for coal and limited railway capacity in the eastern direction.

The regions’ dependence on loans is also growing. Debt service expenses for the quarter increased 2.2-fold, to $584 million, while the total public debt of russian regions reached nearly $49.7 billion, having risen by 3.3% over the quarter. The sharpest increase was seen in bank loans, whose volume jumped from $3.19 billion to $10.27 billion. The regions are becoming increasingly dependent not on federal subsidies but on banks, which in the long run will only deepen the debt trap.

The deterioration of the rf’s regional budgets is not a mere statistical detail but a sign of the narrowing financial base upon which the regime’s internal stability rests. The decline in business profitability, particularly in industrial and resource-rich regions, points to deeper structural problems, as these very territories until recently formed the foundation of the rf’s manufacturing, export, and tax-generating capacity. The longer the war continues, the faster this foundation crumbles.