Khakassia Bets on Coal

Khakassia Bets on Coal


The Republic of Khakassia urgently adopted a revised version of this year's budget. It is practically deficit-free. However, experts believe that the republic’s authorities are fooling with the numbers again.

As wrote earlier, the prosecutor's office succeeded in canceling Khakassia's budget at the end of July. It was considered inflated. The government had to urgently make changes to the documents to keep the deficit within legal norms. The supervisory authority criticized Khakasia’s draft budget 2021 in the beginning of the year. Prosecutors rejected the proposed deficit of 19 % of revenues, which exceeded the permissible federal norm by 4 %. The legal proceedings lasted for several months. On July 30, the Novosibirsk court of appeal supported the Supreme Court of Khakassia and Khakasia prosecutors. The budget law was scrapped which suspended budget payments in Khakassia. Such an embarrassing situation had never happened before in the Russian regions. The Supreme Council of the Khakassia was asked to consider a 4.5 billion ruble cut ($61.52 mln) in budget allocations including salary reductions. Officials promised to attract federal budget subsidies to patch up the remaining deficit.

An urgent session of the Khakassia Supreme Council took place on August, 6. As Igor Tuguzhekov, acting Finance Minister of the Republic of Khakassia said, the new budget revenues would amount to 43.7 billion rubles ($597.38 mln). The expenditure part was 43.8 billion rubles ($598.75 mln). It means that the Finance Ministry reduced the deficit to zero instead of several billion rubles. This move did not sit well with all deputies. The faction representing the Liberal Democratic Party of Russia (LDPR) refused to vote and left the session. The remaining members of the Supreme Council voted unanimously.

“The republic is governed in an irrational way, as the budget cancellation through legal action has shown. A member of the CPRF [Communist Party of the Russian Federation] party was elected, and now we justify his mistakes, weaknesses, and corruption within his government, alleging that he is under pressure and hindered in his work. But the insiders know that this is not true. The CPRF together with United Russia, Communists of Russia, and A Just Russia parties, votes in favor of an illegal budget, rejecting all the projects and prospects for the region. We knew about the budget flaws back in December. Before adopting the amended version, we should punish the guilty officials, including the regional governor and the parliament speaker,” Mikhail Molchanov, head of the LDPR branch in Khakassia, told

The Federal Treasury began to monitor Khakasia in 2018 due the republic’s long-standing financial problems. Khakassia's huge state debt continues to grow. According to the Ministry of Finance, it reached almost 25 billion rubles ($341.75 mln) last year.

Khakassia's financial standing largely depends on the prices of raw materials, such as coal, a prime item of exports. The prices are rising now. Khakassia’s Ministry of Finance reported a 30-percent or 2.5-billion-ruble increase ($34.18 mln) in 1Q budget revenue to 11.3 billion rubles ($154.47 mln) year-on-year. Experts believe that the government has taken advantage of the improving financial situation to set the budget deficit at zero. Officials are hoping for stable prices, otherwise, the budget situation might become even more embarrassing.

“The government of Khakassia chose the easiest way: it increased the planned revenues to keep within the norms of the budget law. Even if it fails to meet the new revenue target, there will be no implications. At present, the price of coal rose to $139 per tonne, compared to $51 a year earlier. If these prices keep for a long time, Khakassia will replenish its budget. The only condition is that it collects 100 percent of taxes. Let's see if it can. In any case, coal price hikes can luckily help the Khakasia government save face following the court’s ruling to reject the initial budget draft,” said Khakasia’s former finance minister Yevgeny Mamayev.

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