Importance The article considers the borrowing-and-debt activities of Russian regions and assesses the effectiveness of regional debt policy. Objectives The paper aims to assess the impact of regional debt policy to create a favorable investment climate and develop the investment potential of a constituent entity of the Russian Federation. Methods For the study, I used the method of comparison. The data of the RF Ministry of Finance on the amount of public debt of the RF subjects and the National rating of the investment climate served as a theoretical basis for the research. The investment climate includes 50 indicators in four areas: regulatory framework, business institutions, infrastructure and resources, support for small businesses. Results I identified a weak investment focus of budgets of the constituent entities of the Russian Federation. There are certain factors specified that reduce the sustainability of the sub-national fiscal system. I prove that the increase of the share of investment costs in budgets of the constituent entities of the Russian Federation contributes to the increase of their own profitable revenues and building their own economic potential. It is empirically determined that the investment activity of the regional authorities would intensify loan-debt operations. In addition, my paper proves that the rapid growth of the debt obligations of the RF subjects' authorities, the increasing debt burden on their budgets pose a real threat to the sustainability of local budget systems and the economic security of regions and the nation as a whole. Conclusions and Relevance I came to a conclusion that the regions' borrowing-and-debt activities will continue to expand. To assess the effectiveness of regional debt policy, I recommend taking into account the investment activities of the RF constituent entities' authorities. The results obtained may be of certain interest to specialists in the field of theory and practice of investment and loan-debt activities, as well as for researchers.
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