The Russian regions’ total budget resulted in a surplus of RUB 492 bln in 2018. The greatest part of the budget surplus was put into reserves for future use. The regions used only one-fifth of the budget surplus to reduce debt, leaving the remainder to finance budget deficits for years to come.

Revenues from taxes on profits increased by RUB 576 bln, making the biggest contribution to the growth of income. One of the main reasons for the growth in 2018 was high commodity prices. This increase accounted for half of the growth in the regions’ tax and non-tax revenues (TNTR) and 38% of the growth in total revenues.

Temporary changes in legislation helped increase the revenue of regional budgets in 2018. Some regions did not retain the canceled federal property tax exemption and received a one-time increase in income from this tax.

In 2018, budget transfers granted to regions demonstrated a record high growth rate (+22% at year-end), to which non-target transfers contributed two-thirds. In general, this growth corresponds to the policy of the Ministry of Finance to redistribute part of the income tax. Regions redistributed transfers further; the share of general transfers also increased in the regional expense structure.

Regional budget expenses grew more slowly than revenue, while investments and interest expenses shrunk. In 2018, regional budget expenditures grew by RUB 1 trln to cover the needs of public education, social policy, the public road system, housing and utilities, and general transfers. Investments decreased by 4% and interest expenses by 18%.