Russian regions are facing the deepest budget crisis in decades. Regional governments are forced to implement sequestration—emergency spending cuts. Governors in regions like Rostov and Irkutsk have already announced billions of rubles in cutbacks for education and healthcare.
The main reasons for the crisis are missed tax collection plans, reduced oil and gas revenues, and decreasing federal transfers. In the first half of 2025, regional deficits totaled 397 billion rubles, risking to rise to 725 billion by the end of September. The worst-hit are resource-dependent areas such as Kemerovo, Arkhangelsk, and Murmansk, with deficits reaching up to 34% of income.
The federal budget is also in deficit, and central authorities are reducing support to regions. This leads to lower or canceled payments for public sector workers, delays in school and hospital repairs, and scaling back development programs. Teachers and medical staff are experiencing cuts in incentive or compensatory payments—in healthcare, these can represent up to 70% of total pay.
To fill the budget gap, some regions are raising business taxes and canceling concessions. De facto, several regions are unable to service their debts, forcing the center to write off budget loans.
Experts project regional budget deficits will top 600 billion rubles by the end of 2025. Large spending reductions and tax hikes are deepening the crisis. This is now a systemic financial crisis for Russia, with implications for its political stability.
