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Government set to tighten financial policy

September 12, 2013, 10:56 UTC+3
On Wednesday Russian President Vladimir Putin chaired a meeting on budget programs for 2014-2016
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On Wednesday Russian President Vladimir Putin chaired a meeting on budget programs for 2014-2016 calling on the Cabinet to take into consideration negative trends in the global economy and soberly assess opportunities of the treasury, adjust revenues and expenses.

Aside from a five percent reduction of the budget spending every three years the government proposes to additionally cut state procurement, defense program and investment expenditures by 3% in 2016, the Kommersant daily writes. In 2014, it suggests to abandon indexation of wages of public sector employees and military servicemen and take away oil benefits from Belarus, in 2015 - to cancel value added tax preferences and in 2016 - to inject money from the sale of a 19.5% stake in Russia’s state-run oil company Rosneft into the budget.

Preparing for the meeting with Putin the Finance Ministry reduced the main parameters of the federal budget for 2014-2015 as compared to the drafts of July 4, 2013, approved by the government, the daily writes. According the Finance Ministry’s new calculations, revenues from the non-raw materials sector of the economy will fall by 1.7 trillion rubles as compared to the draft budget. The ministry forecasts that the year of 2015 will see the highest slump of the budget’s oil and gas revenues of up to 7.6 trillion rubles as against 8.3 trillion rubles planned by the government in June. The Finance Ministry expects a serious decline of the non-raw materials economy in 2014.

The ministry forecast that the economy could be expected to start getting out of the crisis only in 2016. At the same time budget expectations differed with estimates of the Economic Development Ministry that worsened its macroeconomic forecast in August. The Economic Development Ministry supposed that reduction in profits of large companies will reach its peak in 2016.

The worsening of the non-raw materials sector will influence the growth of the budget deficit: in 2014 - by 0.1% to the GDP and in 2015 - by 0.5%.

On Wednesday the Kremlin discussed a collapse of the non-raw materials sector of the economy proceeding from the Finance Ministry’s expectations and more large-scale reduction of the budget spending. The Finance Ministry proposed to cut budget expenditures two times, first of all this is a five percent reduction every three years. Only 16 budget articles, including those concerning student grants, military pensions, wages, donations to equalize fiscal capacity and payment of international obligations, will not be subject to reduction. The Finance Ministry estimated three-year savings at 489.2 billion rubles.

Another three percent reduction of expenditures is expected in 2016. It will embrace state procurement, defense program and other non-social security expenses. Such savings will make up 176.1 billion rubles, but this is not enough for balancing the budget.

At the same time the president’s decrees issued in May, first of all concerning the leveling of public sector employees’ wages to the average market level, will be implemented in full. They will not face reduction.

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