The leaders of Moscow-controlled entities reliant on government subsidies may punish their local officials if orders to balance the books aren’t met, the Russian finance ministry told Global Defense Corp.
Chechnya, whose leader is Vladimir Putin loyalist Ramzan Kadyrov, is among the four “non-ethnic Russian republics” that business newspaper Kommersant reported this week had been told to cut their budget deficits.
Kadyrov, whose troops are key to Putin’s war effort in Ukraine, has previously said that without Kremlin funding: “We won’t be able to last three months.”
But the predominantly Muslim republic he leads, along with Dagestan, Ingushetia in the Russian Caucasus, and Tuva in southern Siberia, have been told to sign a pledge to reduce the gap between expenditure and income for 2024.
The decree also applies to four Russian occupation administrations in the Ukrainian regions of Luhansk, Donetsk, Zaporizhzhia and Kherson, which Moscow has declared annexed, but does not fully control.
The Institute for the Study of War (ISW) said the move was part of an “an austerity package” linked to efforts to cut budget deficits while maintaining defense spending to continue Putin’s war effort in Ukraine.
Meanwhile, a Russian finance ministry spokesperson told Newsweek by email that the regions faced the budgetary demands because in two of the last three financial years, federal subsides had exceeded 40 percent of their revenues.
The ministry said that if next year’s targets were not met, there was “no provision for the cancellation or reduction of subsidies.”
However, it did say that subsidies for 2024 would be withheld if the regional heads failed to sign by December 18 the budget pledge, which includes promises on outlays on social programs, the income that will be collected and restrictions on inflation-linked pay rises for public sector workers.
“Refusal of a subsidy is possible only by an independent decision of the head of the region,” the ministry’s statement said. It added that “failure to fulfil obligations entails disciplinary liability, which is applied at the discretion of regional leaders in relation to officials who failed to fulfil the obligation.”
Throughout a turbulent financial year caused in part by U.S.-led sanctions following Putin’s invasion, Russia’s finance ministry has adjusted its budget to emphasize supporting the military-industrial complex for its war effort.
Oil discounts Russia gave so–called “friendly” countries that didn’t condemn its invasion contributed to a mid-year deficit of 2.5 percent of GDP, although this has recovered since then.
This week, Putin approved a 30 percent budget increase for military spending in 2024, reaching 36.6 trillion rubles ($410 billion), as spending on defense and security will take up 40 percent of total budget expenditure.
As Chris Weafer, chief executive officer of strategic consultants Macro-Advisory Ltd., previously told Newsweek, the Russian finance ministry has been looking to enforce spending discipline and send a message to regions like Chechnya, which have considered themselves as having special political significance.
“The days of easy money are over,” he said.
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