The budget forced compromises

The budget forced compromises

Moscow. October 8. Budget-2016 was prepared in a situation where using cosmetic measures to once again postpone the unpleasant system solutions was no longer possible – too big and obvious problems with replenishing the revenue part of the backdrop of inflated costs. As a result, the project was a result of forced trade-offs between financial, economic and social units, between the government and the FEC, and compromise, which satisfied neither one nor the other, nor the third.

Pension savings, despite previous promises, once again froze. Pensions has decided not to index on actual inflation and the target, and now the authorities have to solve a difficult task – to explain to the citizens what is the target inflation, and what is the connection between the targets of monetary policy the Central Bank and the actual reduction in their income in real terms. Working pensioners, however, this is not the case, their pensions will not be indexed, in principle, neither the 12% nor 4%. On the other hand, the proposal generally deny them the fixed portion of the pension in the official agenda of the budget discussions and was not included. From oil and gas companies will take 300 billion rubles “devaluation” of profit is not enough according to the Finance Ministry, who initially wanted to withdraw twice as much, and a lot of the industry, now threatening the freezing of investment programs and declining production.

The time for unpopular decisions

In fact, at the meeting of the government Commission on budgetary planning, which precedes the already rather symbolic approval of the budget bill by the government, the real intrigue was short. Freezing of pension savings, which seemed to have become a part of history spring after the government’s decision to maintain the cumulative system, in the last few weeks has suddenly become virtually uncontested. Suddenly – because unlike previous episodes, this time there was an intense public debate was not, in fact, was not and is not turbulent. In a situation where it is necessary to cut on live, virtual funded part, despite its role in the development of the financial market, has become a collective victim.

“The decision to freeze for 2016 pension savings”, – stated on Wednesday evening the head of the FIU Anton Drozdov the meeting of the tripartite Commission on socio-labor relations is a fact that became obvious a few days ago, but still officially not declared. However, the Ministry of Finance in its calculation of the reserve funds of the budget of 342 billion rubles from “freezing” had already laid.

Ex-Minister of Finance Alexey Kudrin, the decision of the government commented without enthusiasm. “The decision to freeze pension savings, this reduces investment, the decision on withdrawal from the oil sector also reduces investments, the budget also reduced mainly due to the investment. Now the actions of the government does not promote the growth (of the economy), thus the extended growth,” said Kudrin at the exchange forum in new York.

The decision to index pensions are not at 12% on actual inflation this year to 4% (this figure is marketed as “inflation target” because the phrase “three times less than it should be” sounds much worse), as was inevitable, and in fact approved last week. Here the role compromise plays a promise to revisit the issue of indexation in the middle of next year. So the Ministry of Finance, podvisshemu your own version, too early to relax – even if the capacity of the budget in 9 months will not be more elections will be in 9 months closer.

“Really, the budget is difficult. The Finance Ministry sent a proposal to index a fairly small – equivalent to 4% of the possibilities, which currently has a budget taking into account our proposals on the financial condition of our country at the beginning of next year. I would support this position in part to address the issue of doindeksatsii on results of work of our country’s economy in the first half of 2016, keeping in mind that we have in the presence of economic reasons to carry out a comprehensive indexation. And thus then the indexing could be divided into two parts. None of us know yet how work the economy in the first half of 2016, but if the results are positive, then it is our duty to take them into account when indexing” – so has formulated the decision of the Prime Minister Dmitry Medvedev. The economy, according to the forecast of Ministry of economic development, next year will work on the top three and will grow by only 0.7% (and the IMF and all Russia read a full-fledged continuation of the recession with a drop of 0.6%).

Low indexation – including the fee for the slowness with which the public is prepared to raise the retirement age. The decision, which the Finance Ministry believes that it is inevitable, in this budget cycle is not entered and not even seriously discussed. However, the rhetoric is changing: for example, Prime Minister Medvedev said on Wednesday that “sooner or later the issue of retirement age will need to apply”. While the government prefers the option of “late”: “at the moment conditions as suggested by some even of my colleagues in the government, you should immediately change the retirement age, we do not, we will not do, despite the fact that this budget would have saved quite a considerable sum, and despite the fact that life expectancy in our country increased significantly versus where we started,” he said.

I will start with a specific category for future pensioners: civil servants, with a “soft” version. “We need to think about a phased introduction of the rules on retirement for state and municipal employees so they could prepare to take vital decision,” he said. The civil servants who will not want to continue working, will be able to retire earlier than this will be provided in future legislation.

Retirement age – the issue is extremely sensitive in the context of approximation vertices of the current political cycle. Therefore, even an ardent supporter of enhancing Alexei Kudrin said Wednesday that it expects its after the presidential elections in 2018.

Work not happy

Another unpopular decision – the refusal from the indexation of pensions to working pensioners. To assess the financial-economic block of the government, this will allow the budget in 2016 to save about 150 billion roubles.

Prime Minister Medvedev, motivating this step, used the arguments of the Ministry of Finance. He recalled that the pension is a government cash benefit, which is paid in connection with the fact that the citizen has lost the employment function. When a person works, he receives a pension, and given the fact that the pension is inflation – indexing.

“If a person is still working, then we can conclude that it is a labor function has not completely lost and, therefore, he makes up for some of their additional needs due to work. And then it would be fair to think about this category of people indexing not received”, – said the Prime Minister at the meeting with leadership of United Russia.

“Of course, once they cease employment relationship, we can fully qualify for indexing. I think it’s perfectly fair,” Medvedev said.

This decision is also a kind of compromise, exchange for refusal (or refusals) from a radical idea at all to deprive working pensioners on a fixed pension, saving already 150 and about 700 billion rubles per year. At least, labor Minister Maxim Topilin told journalists on Wednesday evening that the issue is not considered.

Payback for a weak ruble

A powerful lobbying resource for the oil and gas industry, contrary to custom, this time not helped, rather, it is not helped. That proves once again – we are witnessing a unique budgetary process.

The first version of “devaluation of withdrawal” has met such strong resistance from oil and all ministries, except, of course, the Ministry of Finance that the final victory of Energy over the fiscal bodies the case seemed solved. Compromise – 200 billion roubles from the oil industry, 100 billion from Gazprom – has also been subjected to severe criticism. The heads of the energy Ministry and oil companies at a recent forum in Sochi has painted a bleak picture of the near future – a drop in investments, stopping projects, reducing production and, here’s the paradox of revenues. The Ministry of Finance in the answer has urged the oil workers not to engage in blackmail, and cost reduction, refusing, for example, from indexation of wages, sometimes double-digit.

Eventually such unpleasant for FEC compromise yet reflected in budget projections. Preservation of rates of export duties on oil at 2015 (42%) will increase Federal revenues in 2016 by 196 billion rubles, and the change in the tax rate on mineral extraction for oil, gas and gas condensate for additional 101.6 billion rubles, estimated by the Finance Ministry.

While the Finance Ministry partially admitted the loss of budget revenues as a result of this exemption, however, is not so significant – reduction of income tax by 6 billion roubles.

In fact, the only intrigue is the level of indexation of gas prices in 2016: the Ministry of economic development from the original 7.5 percent through the intermediate 5% 2 came to%, however, the Minister Alexei Ulyukayev said earlier that the withdrawal from Gazprom 100 billion rubles through the met may soften stance on indexing.

The budget in figures

The main parameters of the budget that the government will approve at the meeting on Thursday are as follows. Revenues in 2016 are forecast to be $ 13 trillion 577 billion 269 million 303 thousand roubles, expenses – 15 trillion 761 billion 952,7 million 604 thousand rubles, the deficit is 2 trillion 184 billion 335 million 649,9 thousand rubles, or slightly less than 2.8% of projected GDP.

The upper limit of the state internal debt on January 1, 2017 – 8,99 trillion, external debt – $55,1 billion or 49.2 billion euros.

Main characteristics of the budget determined on the basis of projected GDP in $ 78,673 trillion rubles and inflation in the range 6.4%.

Reserve Fund in 2016 will be reduced from 3 trillion 379,8 billion rubles to 1 trillion 249,3 billion rubles, national welfare Fund – from 4.9 trillion rubles to 4,69 trillion roubles (as of 1 October this year, the cumulative amount of the Reserve Fund amounted to $ 4 trillion 670,50 billion rubles, NWF is 4 trillion 878,8 billion rubles).

According to the Finance Ministry, in 2015 to Finance the deficit of the Federal budget, will be used 2.63 trillion rubles from the Reserve Fund and national welfare Fund, in 2016 1.97 trillion rubles.

The role of privatization in profitable base of the Federal budget in 2016 will be minimal. In 2016, the Finance Ministry lays out privatisation proceeds in the amount of 33.2 billion rubles – this is much more than in 2015 (so far only 5 billion roubles), however, relative to the planned deficit is only about 1.5%.

In addition to the release of reserves, the deficit will be financed through domestic borrowing. The draft budget for 2016 provides for a volume of pure attraction of the state internal borrowings in the amount of 500 billion rubles. To repay rouble bonds will be allocated 702 billion rubles, gross involvement of the domestic market will be 1 trillion 202 billion (200 billion rubles, and in 2015, reserved for the exchange of non-liquid OFZ standard editions). The foreign market is unlikely to come to the rescue: while for Russia it is almost closed, that is reflected in the budget: the Ministry of Finance for the first time in several years changed in the budget upper limit of external borrowings. In the budget for 2016 ceiling of borrowing in the international capital markets was set at $3 billion, from traditional $7 billion But this amount is unlikely to be involved, stated earlier the Ministry of Finance. The Ministry of Finance next year may make a currency borrowing in the domestic market.

Expenses of budgets of the budgetary system of the Russian Federation on section “national defense” in 2016 it is planned 7.1% lower than in 2015. Next year they will amount to 2 trillion 887,9 billion (3.7% of GDP) against 3 trillion 109,6 billion (4.2% of GDP) in 2015.

Expenditure under the section “Homeland security and law enforcement” and is expected to decline by 0.5%, to 2 trillion 140.5 billion rubles (2.7% of GDP). It is also expected to reduce expenditures under section “Social policy” – by 2.2%, to 10 trillion 603,3 billion (13.5% of GDP).

Increased spending is planned for the sections “national economy” (+10,9%), Education (+1.8%) and Healthcare (+7.1 per cent).