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Russia’s 2015-2017 budget relies on optimistic forecasts

October 23, 2014, 18:05 UTC+3 Alexandrova Lyudmila

MOSCOW, October 23. /TASS/. Russia’s draft budget for 2015-2017, which the State Duma will be scrutinizing for the first time on Friday will certainly be given a go-ahead. There should be no doubts about that. The United Russia faction, having a majority in the lower house of parliament, has made up its mind to support the bill. It claims that the budget has an unmistakable social thrust. In the meantime, the oppositional factions in the State Duma insist that spending on education and the health service should be immune from any cuts. Also, they argue that the proposed financing of agriculture will be insufficient.

Many experts are warning that the draft budget relies on an unduly optimistic economic forecast.

Experts at the Russian Academy of the National Economy and Public Administration and the Gaidar Economic Policies Institute have presented their own vision of the draft federal budget for three years to come. “From the standpoint of incomes and spending the 2015-2017 budget will have a deficit, while this year it has a surplus,” one of the authors, senior research fellow at the RANEPA, chief of the budget policy laboratory at the Gaidar Institute, Arseny Mamedov, has told TASS. “Spending in 2015 will total 20% of the GDP, and incomes, 19.5%.

The budget, according to the analyst, relies on an optimistic economic forecast, including a price of oil of 100 dollars per barrel and more. Therefore, he believes, the deficit will most probably be greater than expected, and the Reserve Fund will have to be tapped. “This is not a stagnant economy’s budget yet, but in fact it may prove crisis-prone: oil price trends will be playing the key role.”

According to Finance Ministry calculations, a drop in the oil price by one dollar per barrel will strip the treasury of 70 billion roubles.

Mamedov does not believe the draft budget is socially-oriented. “Military spending will go up by 0.8% of the GDP to 4.2%, while spending on social support for the population, including pensions, by 0.4% of the GDP to 5%. Spending on the health service and education will be shrinking.”

“Soaring defence and social policy expenditures will entail cuts in the funding of law enforcement, the national economy, the health service and education,” the authors of the report say. Defence spending in 2015 in contrast to that in 2014 will go up from 2,474.6 billion roubles to 3,286.8 billion roubles, and on social policies, from 3,488 to 4,001.9 billion. Spending on education will go down from 649.8 billion roubles to 618.9 billion roubles, and on the health service, from 535.7 billion roubles to 421.1 billion roubles. (The rouble’s current rate of exchange is roughly 41 roubles per dollar).

“Education and the health service are the hardest-hit budget articles,” Mamedov says. Although the salaries of teachers and doctors will continue to be raised in accordance with the presidential decrees of May 2012, next year’s increase will be insignificant, by 5.5% - an equivalent of the expected inflation rate, which certainly turn out worse than anticipated. Under the road map plan drawn up on the basis of the decrees budget financed wages are to be raised by 10%-15% by 2018.

“The health service spending is to undergo a third reduction in a row in absolute terms,” the first deputy chief of the State Duma’s budget and finance committee, Oksana Dmitriyeva (of the A Just Russia party), told the daily Moskovsky Komsomolets. The funding of stationary medical service (federal clinics) is set at 60% of the 2014 level.

The extra 180 billion roubles to be invested in the mandatory medical insurance fund do not remain there, Dmitriyeva said. “As much as 140 billion roubles will be taken away into the federal budget and then funnelled into support for regions! These billions will be distributed among federal budgets without specific targets being identified and may be spent on anything.”

As far as education is concerned, the Education and Science Ministry has pointed to an absolute reduction in spending on higher education, Dmitriyeva said.


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