"The reasons for why the regions incur debt are different. Such loans may intend to cover the infrastructure development, to shore up cash shortages or to pay the teachers and doctors," Analytical Center expert Anton Steshenko told RBC TV in a live interview.
The budget is not the only source for financing regional development
The amount of state debt must be kept at an acceptable level relative to budget revenue, and problems may emerge if the debt exceeds half the regional budget revenue. "As a rule, regions like this have very slowly growing revenue so they need to put in place a set of measures to promote economic activities so as to expand the taxable base," the expert believes. It's equally important to promote investments.
The analyst believes that regions with a lot of debt must implement a comprehensive policy comprising efforts to: increase the efficiency of budget spending, regularly monitor tax benefits, assess the efficiency of tax benefits, legalize black market activities, increase the efficiency of budget revenue and spending management.
As for the policy of evening out standards, it is being implemented, Mr. Steshenko noted. However, the introduction of national quality standards probably will unlikely be possible. But that's a goal we should be striving for, according to the expert.
"Today we are talking about the parameters of the regional budget system, but the budget is not the only source they have for financing their development. Investors and businesses are just as interested in developing infrastructure in the regions as the state does. And the measures that are currently being developed such as infrastructure mortgages, tapping private money to build new properties can become the main driver of growth and a source of financing for investment projects," Mr. Steshenko said. "At the same time, the regions should more actively use the programs that exist at the federal level. For example, the Industry Development Foundation finances loans for small and medium sized businesses but less than half of the Russian regions have set up foundations like that." The regions anticipating the changes and volunteering to be the pilot regions to test new tools even at the very early stages of the development of federal programs are to get the advantages in the long term.
One positive example of the fast paced development and comprehensive reforms in the public sector is the Leningrad Region, according to Mr. Steshenko.