Russian Debt Relief

Plus Contest Info

At the beginning of a government meeting dealing with online and telephone fraud which has reached epidemic proportions within Russia and which Ukraine has weaponized, the initial focus was on two types of debt relief—one for individuals and one for regions which IMO are unique. I also want to inform readers about a contest open to everyone globally:

The National Centre RUSSIA invites experts from around the world to share their ideas on fostering sustainable growth. Interested participants are encouraged to submit essays on one of the four main topics by March 15, 2025. Submissions should be either a five-page essay or a 10-minute presentation in the author's native language and can be sent to dialog@russia.ru.

RT’s article has the above info and further background. The National Centre’s website has all the additional rules and portal for submission. Yes, I intend to enter and will publish my essay here.

The fraud discussion is very long and detailed regarding Russia’s methods. I assume most readers are aware that they are continually targeted by fraudsters vie email and telephone and have their own defense mechanisms, so I won’t be providing the translation of that portion of the meeting. Here’s debt relief Russian style:

Vladimir Putin: Dear colleagues, good afternoon!

As you may have noticed, the Board of the Ministry of Internal Affairs has now discussed a number of issues, including the fight against Internet fraud. Today we will discuss this topic at such a level and in such a composition. We have Dmitry Grigorenko, Elvira Nabiullina and Igor Krasnov scheduled as speakers.

But first, a few current questions. Last year, we agreed to write off up to two-thirds of budget loan debts to the constituent entities of the Russian Federation, provided that at least 50 percent of the released funds are allocated to housing and utilities projects.

Anton Germanovich, how are things here?

A. : Good afternoon, Vladimir Vladimirovich! Good afternoon, colleagues!

Yes, indeed, in your Address to the Federal Assembly of the Russian Federation, Mr Putin, you gave instructions to write off two-thirds of regional budget loans, provided that the released funds are allocated for the implementation of infrastructure projects.

The volume of write-offs of such loans is more than a trillion rubles. This will affect 79 subjects of the Russian Federation. The Government of the Russian Federation has approved the rules for such write-offs.

The Ministry of Finance of the Russian Federation is working to conclude agreements with the regions that provide for the postponement of debt repayment dates for the period from 2024 to 2029 inclusive to the period from 2030 to 2039, respectively, and write off such debt as funds are allocated to infrastructure projects.

According to the proposals received from the regions, the funds from debt cancellation should be allocated to the following activities: about 50 percent of the total amount of write–offs should be spent on housing and communal services, as you also gave such an instruction; 18 percent, or almost 200 billion rubles, should be spent on relocation from the emergency fund and updating public transport.

13 percent, or about 140 billion rubles, is proposed to be allocated by the regions to implement new investment projects, including the capitalization of regional industrial development funds, guarantee and microfinance organizations, and to compensate for lost income as a result of providing investment tax deductions. About five percent, or 55 billion rubles, is proposed to be allocated for the development of strong settlements.

For regions with a low level of budget security, it is possible to allocate the released funds to a broader list of expenditures, such as achieving national development goals. 18 regions with resources of 17 billion rubles applied in this direction. 25 regions propose to allocate about 77 billion rubles for the costs associated with supporting participants in a special military operation and their families.

For subjects that are part of the Far Eastern Federal District and the Arctic Zone, it is possible to direct resources to the implementation of city master plans. Nine regions applied for the sum of 60 billion rubles.

We have a fairly flexible mechanism: until November 1 of this year, and in subsequent years, the regions can specify their proposals on the direction of the released funds.

It is important that today the volume of regional debt is slightly more than three trillion rubles, and such write-off, such support for the regions will ease the debt burden by about a third.

Dear Vladimir Vladimirovich, we are currently working on increasing the number of regions that have a broader list of expenses for loan write-offs. It is proposed to consider increasing the maximum value of the level of budget security from 65 percent to 85 percent of the national average, which will further increase the number of regions with broader areas for writing off loans.

We generally support such a proposal, and it has been worked out with the State Council. At the same time, we understand that the regions should not forget that in accordance with your instructions, Mr Putin, 50 per cent of the write-off funds should be allocated to issues related to the creation of infrastructure in the housing and utilities sector. Such proposals have been worked out. We are ready to support and ask for support for this proposal as well.

Thank you.

Vladimir Putin: Good. So, you are developing this work, right?

Alexander Siluanov: Yes, the work is underway. The regions have sent relevant proposals. The debt burden has already been distributed this year, and in the following years the regions will reduce their respective debts by the amount actually spent and financed for the priorities that you identified in your Address.

Vladimir Putin: Okay, thank you very much.

Dear colleagues!

At the end of the year, we discussed issues related to what is happening in the economy, related to the availability of loans, and agreed to pay special attention to supporting individual projects, industries, and enterprises. In this regard, monitoring the state of strategic companies is very important.

Alexander Valentinovich, how are things going here?

Alexander : Mr President, dear colleagues, good afternoon!

Vladimir Vladimirovich, in accordance with your instructions following your meeting with the business community in December, the Government of the Russian Federation has resumed the work of the sub-commission on improving the sustainability of the financial sector and certain sectors of the economy. It operates within the framework of the relevant large government commission headed by the Chairman of the Government of the Russian Federation.

The key task of our sub-commission is to assess the current state of economic sectors in general and separately for system-forming organizations. We also look at the degree of risk of reducing financial and economic sustainability and, if necessary, develop measures to support individual industries or individual companies, investment projects that have already been launched.

The work is organized and deployed. Accordingly, the list of strategic enterprises and the monitoring system have been updated for this purpose. The monitoring perimeter includes more than two thousand enterprises. A wide range of representatives of business and expert circles are involved in the work of the sub-commission, and the Central Bank is involved, as well as regions, representatives of the Federation Council, and the State Duma.

At the moment, we have already considered nine key sectors of the economy: industry, transport, agriculture, mechanical engineering and others.

What would you like to mention? In general, the situation is stable at the moment, and there are no systemic problems. At the same time, of course, we pay special attention to certain industries and organizations that are at risk in accordance with the monitoring, and this is primarily in terms of solvency indicators or loan restructuring needs. First of all, this applies to housing construction, the coal industry, transport engineering and the automotive industry.

We work closely with my colleagues – both Denis Valentinovich Manturov and Marat Shakirzyanovich Khusnullin - and we constantly check hours, hold individual and joint meetings with them. I would like to note that in general, more than 40 support measures have already been developed. I will mention some of them.

In particular, in the transport engineering industry, for example, the limit on the purchase of public transport under the program of the Ministry of Industry and Trade has been increased by four billion rubles. The total limit of leasing programs has been increased. Additionally, we are working on mechanisms to increase regional purchases.

A decision was also made to recapitalize Russian railways in the amount of 15 billion rubles in order to ensure, first of all, additional demand for the purchase of locomotives and rolling stock.

As for housing construction, we reported to you in detail at a separate meeting, and the Government has already adopted a resolution on February 7, following the decisions you made at the meeting to increase the marginality of preferential mortgage programs, such as family mortgages, Far Eastern and Arctic mortgages.

Accordingly, we already see some results here. In the mortgage lending market in recent days, banks have begun to reduce rates by about 1-1.5 percent, depending on the size of the initial payment. This is already a good, positive signal.

In the steel industry, we have also developed a list of continuous cycle enterprises to prioritize rail transport to support demand and export. The Government commission on transport has also been approved, and a government decree is being prepared and will be issued in the near future. Here, too, we actively cooperate with Vitaly G. Savelyev and relevant ministries and stimulate demand in the consumer industries: mechanical engineering and construction.

And if we take the timber industry, we also considered this industry separately: in general, if we talk about the industry, the situation is quite stable. But, however, we see difficulties in local markets located at a remote distance from sales markets. First of all, this applies to enterprises located in the North-Western Federal District.

We plan to support production here by stimulating demand in the consumer sectors--construction and housing and communal services--and by continuing the program of converting boiler houses to pellets. For two enterprises, we are actually manually considering measures to improve the health of these enterprises together with the Central Bank.

As we have also reported to you in the coal industry, I would like to point out here that the main issues are solved by exporting coal products and optimizing logistics.

As far as agriculture is concerned, we have the main task, the risk–-we are seeing an increase in production costs against the background of low profitability. We are implementing a number of measures to support operational and investment activities. One of them is concessional lending.

Additionally, on the eve of the spring campaign, 42.1 billion rubles were allocated for concessional loans this year, including 34.1 billion rubles for short-term concessional loans. This made it possible, among other things, to start purchasing fuel and lubricants, fertilizers, and seeds for sowing operations.

We are also working on measures to stimulate rice production by opening up highly profitable export markets. We are working on concluding long-term contracts with retail chains with the price formula. Prime Minister Mikhail Mishustin gave such instructions.

There are also mechanisms for supporting companies in the fishing industry. We also work together with the Ministry of Agriculture and Dmitry Patrushev and keep our finger on the pulse.

As for agricultural machinery, I would like to note that the main task here is to increase the availability of agricultural machinery. To do this, we will capitalize the program of preferential leasing in the amount of 4.5 billion rubles annually-from 2025 to 2027. We will launch another preferential leasing program together with DOM. RF.

To protect and support Russian machine builders, it is also planned to postpone the payment of the scrap fee until the end of this year, which will allow enterprises to maintain working capital.

Dear Vladimir Vladimirovich, Colleagues!

Summing up, I would like to note that monitoring the industries of strategic organizations shows that, in general, the current situation is under control and fairly stable.

At the same time, there are certainly industries that require special attention and support, which I just mentioned. We work with them together with industry agencies and communities. All decisions taken by the commission are under special control. We regularly inform the Prime Minister about the results of the sub-commission's work.

In the near future, we plan to review the current situation in the production of mineral fertilizers, in the construction of fishing vessels, in the housing and communal services and in the energy sector. We will report to you, Mr President.

Thank you.

Vladimir Putin: Good. Thank you very much.

Please keep this really under constant control.

And one more question. In September 2020, we created a mechanism that allows citizens to apply to the MFC for writing off debts that a person is no longer able to pay–-this is the so-called out-of-court bankruptcy of citizens.

I asked my colleagues from the Government to think about extending this program to its participants. Maxim Gennadievich, what is the state of this work?

Mikhail : Dear Vladimir Vladimirovich, Dear colleagues!

The mechanism of out-of-court bankruptcy was launched, as you said, on your instructions, in 2020 to help conscientious citizens who find themselves in a difficult life situation and cannot pay off their accumulated debts.

The procedure takes place without the participation of the financial manager and without the participation of the court and is free for the citizen. The process itself is structured as follows: a person applies to a multifunctional center at the place of residence, submits an application, attaches a list of creditors and indicates the amount of debt. After checking the information, which takes a maximum of five days, the information is published in the Unified Federal Register of Bankruptcy Information, which is publicly available. Next, six months are given. If during this time the creditors do not make themselves known, the debt is canceled automatically. At the same time, the mechanism was constantly improved. Initially, it could be used by citizens for whose debts enforcement proceedings have been completed and there is already an enforcement document stating that the debt has been confirmed by the court, and so on.

Since November 2023, on your instructions, we have made the procedure more accessible; there have been several innovations.

First, in addition to citizens with completed enforcement proceedings, pensioners and families with children who have been collecting debts for more than a year will be able to use this procedure. That is, it means that the courts are not always over yet, but if they have been collecting money for more than a year, then, accordingly, there is such a possibility. As well as citizens who can't pay off their debts for more than seven years.

We also doubled the parameters for debt write-offs at the lower and upper limits: previously, the range was from 50 thousand rubles to 500 thousand rubles, now it works from 25 thousand to one million [rubles]. Significant expansion.

Finally, since July last year, we have simplified the procedure, as you instructed, and converted it to an electronic format. What does it mean? Previously, to confirm that a person meets the new criteria, it was necessary to bring information to the MFC. For example, it was necessary to come to the Social Fund and confirm the status of a pensioner or a recipient of subsidies.

Now you don't need to collect such papers. All relevant departments themselves exchange data through an electronic system of interdepartmental interaction. These are our electronic services, "electronic government". It [the system] automatically confirms that the citizen meets the criteria for debt cancellation. And since September of this year, banks should be connected to the system, so that people do not bring executive documents either, but can automatically receive [data].

Such a targeted adjustment of the mechanism covered the most socially unprotected categories of the population, and the transfer of the procedure to "digital" saved people from going to instances. The results are shown by the dynamics of requests.

During the period of out-of-court bankruptcy, 95,000 procedures have been launched since 2020, three-quarters of them since November 2023,when we expanded the entire mechanism. It is important that half of these requests came from the older generation. To date, debts have already been written off to 20 thousand pensioners, four thousand families with children and five thousand citizens who could not pay their creditors for more than seven years. In general, for the entire period of the out-of-court bankruptcy, debts were written off to 62 thousand citizens.

Mr Putin, only 0.1 per cent of all appeals are transferred to the judicial regime. In other words, the mechanism really turned out to be effective.

Now, on your instructions, we have worked out with the departments special conditions for participants of a special military operation, so that this opportunity is also available to them in the same parameters. Last week, the Government supported the relevant bill and sent it to the State Duma. We are confident that the deputies will quickly hire it, and it will be adopted, we hope, in the spring session.

In general, Mr President, we see that the procedure is applied by the citizens for whom it was created, and it works as you set out. We will continue to monitor it, and if necessary, we will adjust the mechanism.

Thank you.

Vladimir Putin: Good.

Please see how this mechanism will work specifically for the participants of the Free Trade Association. Take a good look. You just need to finish it, make the appropriate regulatory decision, and then look at the practice of application.

Thank you very much. [My Emphasis]

The structure of Russia’s government and how it allocates monies allows it to use debt forgiveness as a developmental tool which not all nations can do. If the regions allocate monies to municipalities in a similar manner, then they could also adopt the same policy.

Keeping tabs on the liquidity in key economic sectors given Russia’s very high interest rates is also good policy and by stimulating demand helps increase revenue flow to those sectors. Having access to the proper amounts of liquidity at low rates prior to planting season has always been a #1 demand from farmers, and its provision is a major reason why Russian agriculture is such a strong sector. What I see is a well-run and well-coordinated government that understands the needs and regulations of its society that will generate the most benefit. And I believe it’s correct to say that value wasn’t learned from the West.

I do hope many readers will be motivated to enter the contest and write an essay.

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