Fitch: Varied crisis effects for Russia governments

Fitch Ratings said in a new report that the global economic downturn highlighted the different abilities of Russian local and regional governments to withstand the crisis.

It also demonstrated the levels of support available from the federal government and underlined the subnationals' generally good ability to absorb shocks, Fitch said.

The economic crisis left a significant proportion of governments with wider budget deficits and higher direct debt, after sharp falls in revenue failed to be offset by expenditure cuts, the agency said.

New debt raised to cover the deficit had a much shorter maturity profile, which intensified medium- and short-term refinancing risks, Fitch said.

However, regions were affected by the crisis to varying extents. Regions with high dependence on federal financing were more resilient and experienced less volatility in the face of the weaker external economic environment, the agency said.

The picture was completely different for regions with strong self-financing abilities based on tax revenue proceeds. These regions are highly dependent on economic conditions, the agency said, and therefore were most exposed to revenue volatility.

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