Economic crisis looms in the North Caucasus

By Natalia Konarzewska (19/08/2015 issue of the CACI Analyst)

The North Caucasus is the Russian Federation’s most economically impoverished region, as well as the most dependent on government revenues. Due to Russia’s dwindling financial situation, federal subsidies for the region are shrinking, which negatively affects welfare and social service expenditures as well as investment projects. Since last year, many state-owned regional companies have gone bankrupt. Fluctuations in government revenues will pressure local governments to increase borrowing from external sources, loans that they will have a hard time paying back. The North Caucasus therefore risks seeing a series of financial defaults.