Moscow. December 30. For the second year in a row there comes a time when the dream of employees of the Russian Ministry of Finance becomes particularly restless. In their nightmares the figures of income and expenditure of the main financial document of the country absolutely do not want to be balanced and to line up in orderly rows, the population is rapidly declining revenues, and the costs multiply, mocking laughing. So begins the preparation of the next draft budget. Recently, his mixing is comparable in complexity to challenge the attention span of the Palace bridge with a span of Casting.
If you have the budget, it is not right
This year the difficulties have reached that degree of concentration, when with a budget under the pressure of the oncoming wind falling oil prices, sanctions and other surprises flew all sorts of useful devices. It was shortened from three years to one, was prepared and submitted to the state Duma almost a month later than usual, and a fiscal rule which limit the amount of costs suspended. In General, putting the position the occupation of which was accompanied by enthusiasm about increasing the predictability and stability of the budget. It is logical that in a world where you can confidently predict, though, that the reality will be worse than predictions, and steadily reducing the cost of oil, like something even unseemly to have long-term and predictable budget. However, all these tricks in the end may not protect it from serious edits soon after the beginning of execution.
In fact, with a few differences repeats the situation at the end of 2014, when soon after the adoption of the budget for the next year the state Duma the Minister of Finance Anton Siluanov announced the first estimates of the possible shortfall of income. Low oil prices, as low economic growth, the ruble, which at that time has not yet began their epic descent in the amount, according to the Minister, could cost the budget of 1 trillion rubles of income.
The budget was then passed with a deficit of 0.6% of GDP (430,7 billion rubles), revenue Ministry of Finance predicted at the level of 15,082 trillion rubles, expenses – 15,513 trillion rubles.
Simultaneously, the first Deputy Finance Minister Tatyana Nesterenko first announced plans to bring in December the limits of budgetary commitments for 2015 in full, leaving 10% room for maneuver in case of revenue shortfalls and the need to reduce costs. It became clear that significant amendments of the budget is already imminent.
The first changes happened rather quickly – in February, the government at the meetings discussed adjustments to revenue and expenditure parts of the budget, which barely began to be fulfilled, and in mid-March, has already introduced a bill with the proposals in the Duma.
At the end of 2014 Siluanov talked about the possible budget deficit in 2015 to 3% of GDP, which with a small deviation (according to the latest assessment of the Ministry of Finance the deficit could reach 2.8-2.9% of the GDP), he eventually will come. However, in March the edit budget increased the deficit to 3.7% of GDP. The rise of this parameter with 430,7 billion rubles to 2,675 trillion roubles was connected mainly with decrease of revenues, which the Ministry of Finance in the end was estimated at 2,542 trillion roubles (to 12.54 trillion rubles). Large-scale reduction of total costs – they were reduced to 298 billion rubles (up to 15,215 trillion rubles). The overall optimization of the expenditures of the Ministry of Finance estimated at about 900 billion roubles to 600 billion roubles of which were reallocated from one cost others.
The next tweak that changed the basic parameters of the budget, was approved by the state Duma in November. Assessment revenue increased by 712 billion to 13 trillion 251 billion. Costs also went up to RUR 202.3 billion, to 15,417 trillion. The deficit declined to 3% of GDP (2,165 trillion rubles). The price of oil, the budget was increased to $53 from $50 per barrel.
The head of audit chamber Tatyana Golikova believes that a hasty edit budget early in the year did not go in his favor. “It was necessary to await the outcome of the first quarter and calmly amend, not to do this no one needs a 10% cut, but the distortion of expenditure patterns, to what has not resulted. On execution of the budget, most expenses that were reduced, then increased,” she notes.
Siluanov is confident that nedovedeniya limits, freezing the indexation of salaries of civil servants and a number of social payments, cutting expenditures and transfers from one to the other allowed us to adapt the budget to the new realities. A mandatory part of the budget is not increased, the deficit managed to keep within 3% of GDP, and spending cuts are allowed to avoid additional pressure on rates in the economy, he argues.
The script continue adapting the budget to the frightening reality in 2016 is still being developed. The end of the year is near, and while the decision to bring not only the limits of the obligations transferred for the next year was not made public, yet the probability that by the end of December reported to be 90% or 95% limits high.
The Minister of Finance, as well as last year, in November started a massive training of the consciousness of the members of the government, agencies and citizens to what is needed is tougher to decide, how to survive is scheduled for 2016, the size of the deficit at 3% of GDP. Such a deficit the great for the Russian economy, to sustain his her not more than 1-2 years, he said, and the drop in income can significantly increase and use up the reserves.
Evaluation of the Ministry of Finance on the shortfall of revenue because of oil that refuses to at least try to come close to the budgeted $50 per barrel, and other factors have started from a level of about 1 trillion roubles and increased to 2% of GDP (1.5 trillion rubles). With that background and taking into account the moratorium on tax increase the choice of actions to preserve budget balance is very small. After enduring a Titanic battle with the oil and gas industry and putting it in the budget for 2016 at the expense of 300 billion rubles, the Ministry of Finance, most likely, the option “fine tuning” of the tax burden temporarily exhausted – even one such attack on the export sector, he is unlikely to hold. If oil prices will not grow, most likely, we are waiting for the spending cuts. It is hoped that this painful procedure will take place at the expense of the least effective spending and will bring long-term benefit to the economy.
Some sources of replenishment of revenue part of the Ministry of Finance sees in improving its administration. In particular, the integration of information systems of tax and customs services can bring, in his opinion, a serious increase of collection of both customs and tax fees. The only question is, at what time the result will come. Another opportunity not to let the budget fall Siluanov denotes a common phrase on the promotion of economic development, which, probably, the situation resembles more a resuscitation procedure. How much and in what terms it can give to the budget, pretty hard to predict.
The Ministry of Finance calls for moderate appetites in respect of the provision in 557 billion, as little as possible to send it for the cost.
The game is in deficit
The increase of the deficit, and as a consequence, increased borrowing to Finance it in addition will not only increase the cost of debt servicing, but will cut off a significant chunk of the market. Net attraction of domestic borrowing for 2016 has already increased by more than three times – from 80 billion rubles in 2015 to 300 billion rubles.
To fight the attempts to increase the size of the deficit, judging by the statements of the Ministry of Finance, he intends to last, raising on a shield the words of the President, who set the task to stay within the limit of 3% of GDP. However, all of the ephemeral nature of budget projections in an era of falling oil prices once again showed the situation with the VEB. The head of the Bank Vladimir Dmitriev in March said publicly for the repayment of external liabilities of the VEB needs state support in a format to be determined. Then about debts VEB forgot for months – probably out of habit relying on expensive oil. Autumn theme is back in the public space, hitting its scale: the expenses for the support of VEB, the balance of which poison many “toxic” assets, can add to the budget deficit 1.5-1.7% of GDP. Final decisions on the web, but for the budget devised an ingenious move to bring this item of expenditure beyond the limit, leaving a shortage within “like 3%”.
“In the order of the President on the results of the message States that you must ensure that the budget deficit next year to 3% of GDP, excluding expenditures required for capitalization of the Bank. This is the case. All external liabilities of the Bank will be performed by the VEB, including the financial support from the Federal budget. These funds can go beyond the 3% deficit,” admitted the Finance Minister.
Is nothing sacred
To save the budget by reducing social expenditures began in 2015 by freezing the indexation of salaries of civil servants and some social benefits, which has been included from 1 October to the level of predicted inflation for 2015.
Note the budget for 2016 ended with the deprivation of the inviolability of pensions, although for many years it seemed that it just can’t be because can be never. Instead of the projected inflation for 2015 the pensions of current retirees, it was decided to index only 4% (technically this is called not “and more we can’t”, and “on the inflation target”) with probability of doindeksatsii in the first half. Siluanov estimated the “cost” of indexation of pensions by 1 percentage point to 70 billion rubles, thus the indexation by 12% would cost 840 billion, 4% – 280 billion rubles. For the indexation of pensions in full will be required to cut spending on education, health and defence, he noted.
If you consider that as a factor in a positive decision on doindeksatsii are sustainable surplus budget, count on it not really necessary. The social block of the government, however, expects that this increase may be financed by the left already in the deep freeze of pension savings, but these hopes are quite precarious. Not particularly encouraging, and recent statements by the President that he doesn’t know whether to spend doindeksatsii. At least, to destroy for the sake of the budget, the government just will not be.
Under the hot hand hit the ball, and working pensioners, which was later decided not to index pensions.
Privatization – the last refuge budgets
The Finance Ministry is trying to sew on to the blanket covering the hole in the budget, additional pieces of revenues from privatization. While next year’s income on this article deficit financing planned in the amount of 33.2 billion rubles, a significant increase compared to 5 billion rubles in the current year, but the deficit they cover only 1.5%.
Siluanov expects privatization in 2016 a 19.5% stake in Rosneft, which can bring a budget of about 500-550 billion rubles, and already thinking about selling not so long ago fell into the hands of the state “Bashneft”.
So far in terms of privatization from a more or less large packages is only Sovcomflot, the proceeds from the sale of the shares which can give the budget of 12 billion rubles. However, this does not mean that other assets will not be sold, assured the head of Rosimushchestvo Olga Dergunova. She, by the way, in early November said that at the meeting with first Deputy Prime Minister Igor Shuvalov was recommended an acceleration of sales of major assets, regardless of the prices on international markets. In the case of support for the President, she said then, the government is ready to implement it.
Among ready for privatization, head of Rosimuschestvo, in addition to “Rosneft” has transferred to RusHydro and Aeroflot. The President in public statements on the topic of privatization of “Rosneft” and “Aeroflot” from these decisions is abstracted. “As for the (privatization) of Rosneft, Aeroflot, I’m still in my articles 2012 wrote, then it probably is. And, in principle, we will continue this work. Of course, the question always arises, is now the market conditions to sell these securities, generating results for the economy share of the property, for example, in “Rosneft”. Never guess – that situation or not. (. . .) I do not exclude that in order not to scorch the reserve, and to provide income and to change the structure (ownership) of these large companies, the government and go to these decisions. I try in these decisions not to intervene. Moreover, the controlling stake in these companies, the state does not lose”, – he said. In any case and the market situation, and the history of the privatization of the last years the Ministry of Finance do not promise easy prey.
Day stand, Yes night hold
A few years ago, the biblical parable of the fat and lean years in the mouth of the then Minister of Finance Alexey Kudrin and if not found a new life, tightly linked with the Russian reality. Told for the first time in the fall of 2008 with brand Kudrinskaya smile, in the period when the crisis winds had already begun to spin the vortices in the Russian economy, but oil has not yet collapsed, it was perceived as a parable. The story which is a good idea to reflect over a glass of wine on rare breaks in the successful struggle for profit, but which hardly can be realized: yeah, maybe bad, but not that much.
Of course, you can argue with the point put an end to the “fat” years for the Russian economy and marked the beginning of “skinny”, we can say only that while “the worst, of course, come”.
Acting Finance Minister believes that the most difficult year for the Russian budget from the point of view of low oil prices will be in 2016, after which the oil producers finally come to their senses, koordiniruyutsya and reduce her sentence, for at such low prices will not last not only Russian, but also world economy.
“So 2016 will be the most complex, we will need to take a series of measures to pass this year. If you decide all matters on budget, we will become stronger from the point of view of financial viability and independence”, – he said in early December. Turned out almost paraphrased Nietzsche – “What doesn’t kill us makes us stronger”. It seems that it will test in the coming year.