Abstract

The study examines debt situation in 189 urban districts of Russia with more than 100 thousand inhabitants in 2015-2020 and assesses key factors determining level of budget debt. The relevance of the study is established by the fact that an overwhelming majority of large urban municipalities in Russia currently have a significant budget debt. The public debt burden significantly limits the cities’ ability to plan and finance urban projects and therefore becomes a key constraint on their development at the present stage. At the same time, the scale and dynamics of municipal debt in Russian cities remain poorly researched. The goal of the study was to identify key factors determining formation of the debt burden in the 189 largest urban districts in Russia and to assess the impact of the debt burden on the level and dynamics of their socio-economic development. The following tasks were completed: analyzing the level of municipal debt burden in the largest cities in 2015-2020 and creating a classification of large cities by the scale and dynamics of debt; determining key factors of formation of the debt burden in large urban districts and calculating their impact, as well as forecasting the debt situation of the largest centers. The analysis was carried out on the basis of the municipal debt volume and structure indicators, collected from the official portals of local administrations and data on the execution of budgets of urban districts of the Federal State Statistics Service (Rosstat). The following key research methods, among others, were used: statistical and economic analysis, mapping and GIS analysis, infographic construction methods and comparative analysis. The results of the study showed that although the country's large cities are characterized on average by a relatively favorable level of debt burden, significant differences in the debt situation between cities remain. Only 37 large urban districts had no debt at the end of the study period, while about 1/3 (53 out of 189) had a debt burden exceeding 50%, and 15% of cities are approaching its critical level. It is proved that at the present stage, municipal debt is not a real tool for the implementation of urban development projects, but is mainly directed to cover the budget deficit and fulfill basic social responsibilities by the end of the fiscal year. It has been revealed that the greatest influence on the debt situation in large cities is exerted by the factor of the city's population (the level of debt burden increases with population growth), as well as the factor of having a regional capital status (regional capitals have higher debt). The factors of the budgetary and financial situation in municipality, as well as economic factors (apart from several cities) resulted to be insignificant. The absence of high correlations of the debt burden of large urban districts with key indicators of the financial and socio-economic situation suggests a high influence of other institutional factors. It is proved that an increased level of debt burden leads to a decline in migration appeal and investment activity in large cities. The growth of debt slows down the rate of wages increase. The forecast of the debt situation in large cities showed that if the current trends persist in the next three years, even a greater deterioration in the debt situation of the country's largest centers can be expected, as well as an increase in their differentiation by debt. The measures planned for introduction in 2022 in order to limit the volume of municipal debt will have little effect and will not result in a significant reduction in the debt burden of cities. All in all, the findings of the study form a negative forecast of the development of Russian large cities for the coming years. The current situation warrants an urgent need to revise the fiscal policy and the power distribution system at the local government level towards expanding the financial and managerial capabilities of municipalities.