Budget 2016: tight but adequate


MOSCOW, October 8. The Russian government has approved today the main parameters of the budget for 2016: the financial plan of the country will be hard, challenging, but adequate to the present conditions.

“The budget, despite its rigidity, adequate to the opportunities that we currently have,” said Prime Minister Dmitry Medvedev, opening a government meeting.

The budget for 2016 is fundamentally different from a similar document, which was prepared in 2014 For the next year, the government draws up the annual budget, not reviewing the forecast 2017-2018. Also for next year cancelled the effect of budget rules, according to which the maximum level of expenditure shall be determined based on the average over the previous three years the price of oil.

The budget will be submitted to the state Duma later than usual deadline – 25 October instead of 1 October.

Efficiency is the inevitable

“Going from all to demand a higher return on the investment funds, to demand greater control over the observance of fiscal discipline,” – said Medvedev. He stressed that now the efficiency in the execution of the budget, it not a slogan, but an inevitability.

The budget for 2016 showed a deficit of 2.36 trillion, or 3% of GDP.

“The budget revenues decrease in the amount of 380 billion rubles, expenses grew 72.5 billion rubles In these circumstances, the deficit next year will amount to 3% of GDP or $ 2 trillion 360 billion rubles”, – said the Minister of Finance Anton Siluanov.

The main sources of financing the budget deficit, as in 2015, will be the use of the contingency Fund. In 2016, according to the Minister, for these purposes from Reserve Fund it is planned to spend 2 trillion 136 billion rubles.

In addition, the Ministry of Finance plans to borrow in the domestic market of 1.2 trillion rubles, which will give a net attraction of funds in the amount of 500 billion rubles. does Not exclude the Ministry and the entry into foreign markets with the Eurobonds, however, the amount will be lower than planned steadily in recent years – $ 3 billion vs. $ 7 billion previously.

Privatisation revenues may amount of 33.2 billion rubles.

Three principle of the budget

The Prime Minister at the meeting voiced three main principles of construction of the budget. The first is fiscal policy should ensure long-term stability and sustainability of the budget system, including the regional level.

For this purpose in the budget the government has provided for the establishment of reserves, which will allow timely response to emerging challenges.

Yesterday the Finance Ministry announced that it plans to reserve in the budget for 2016 to 1.1 trillion rubles, including 500 billion rubles over considered in the act from the Reserve Fund and 342,2 billion rubles from the freeze of pension savings.

In addition, redistribution of budgetary allocations to reserves budget you can allocate up to 120 billion rubles, and from the use of the balance of means of the Federal budget (except for remnants of the Road Fund) – up to 150 billion rubles. These funds can be reserved for additional measures to support the economy and social support of citizens and to provide humanitarian assistance to the population of foreign countries.

Absolute priority

The second principle articulated by the Prime Minister, the fulfillment of social obligations of the budget remains an absolute priority.

“Yesterday took the decision, despite difficult market conditions, to consider the possibility to hold another doindeksatsii pensions in the first half,” Medvedev said.

The Ministry of Finance was proposed to be limited to a single indexation of pensions next year by 4%, however, this decision was not adopted in its purest form and government came to a compromise: if the economic situation will be favourable in the second half of the year will be held doindeksatsii.

Another social issue that was actively discussed since the spring of this year is the fate of the funded part of pensions, which remains frozen for the second year in a row.

Medvedev at the end of April has declared that the cumulative part of the pension system will continue and the moratorium on transfer of pension money in the Fund is not renewed in 2016, But on the sidelines of St. Petersburg economic forum on June 18, Russian Deputy Prime Minister Olga Golodets reported that the government is discussing the extension of the moratorium on the accumulative part of pension in 2016 due to the uncertainty of funding sources transfers FIU.

In turn, the Ministry of Finance this summer was regularly assured all that by 2018 the budget projections are taken into account to cancel the “freeze”. But in mid-September, Golodets reported that these funds can be used for the indexation of pensions in 2016 in line with inflation. According to her, in order to index pensions in full in 2016, would be enough 350 billion rubles, taken from the storage component.

October 7, after the meeting of the government Commission on budgetary planning, the head of the FIU Anton Drozdov said that the decision to freeze pension savings in 2016 is accepted. But the Finance Minister noted that 342,2 bn of these savings in the budget due to the transfer of the pension Fund, goes into the reserves.

The cost of investing

The third principle is to help the real sector to adapt to the current situation.

“We need to continue to focus on technological modernisation, infrastructure development, support import substitution program, including on agriculture. Yesterday we made the decision not to reduce the ruble investments in the agricultural sector,” Medvedev said.

Only program APK requires 237 billion rubles, said earlier the Ministry of agriculture.

“We, in accordance with the decisions that were taken yesterday, part of this Fund (budget reserve) has already distributed. Part of the funds in the amount of 75 billion rubles from the Fund directed on support of agriculture, to complete the assignment and does not reduce the volume of spending on agriculture compared to the level reached in the current year, – 237 bln rubles,” Siluanov said today.

Overall on the national economy, according to preliminary data of the Ministry of Finance, the planned 2.5 trillion rubles, which is 11.7% higher than in 2015.

Recovery

The budget for 2016, drawn up on the basis of the socio – economic development prepared by the Ministry of economic development.

The baseline scenario for the MAYOR next year GDP growth will reach 0.7%, from second quarter this figure year-on-year will leave on positive indicators, and industrial production will show moderate growth at 0.6%.

The Ministry expects almost double the slowdown of inflation in comparison with the current year – to 6.4% and the price of oil will be $50 per barrel. The average annual dollar exchange rate will reach 63,3 RUB.

However, the “dangerous situation” is emerging in the field of investment, said the Minister of economic development of Russia Alexei Ulyukayev, presenting the forecast at a government meeting. Companies ‘ investment plans will be deferred to a more distant time periods. “This year it will be about 9.9 percent next year, much smaller, but still negative value of minus 1.6 per cent,” he said.

Cautious forecasts the MAYOR has laid in a conservative scenario, according to which the price of oil will be $40 per barrel. In this forecast, the MAYOR expects a higher inflation rate is 8.3% and lower investment activity. “This situation is most negative to restore economic growth. In 2016 in this scenario, recovery does not occur, the decline can be 1%”, – said Ulyukayev.