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Russia's 2014-2016 budget full of contradictions

October 28, 2013, 12:25 UTC+3

Figures do not correspond to current economic realities

1 pages in this article

The most loyal officials of the Russian Central Bank, State Duma, Federation Council or the Accounts Chamber have found many contradictions and inconsistencies in Russia’s new financial plan,” writes Nezavisimaya Gazeta newspaper. First, the budget figures mismatch the officially stated principles of the fiscal policy. Secondly, they do not correspond to the current economic realities - that is, the continuing stagnation the ways to overcome which have not yet been found.

Russia's head of state announces the principle of the achievement of the final result within the state programs as the foundation of the fiscal policy. The idea seems to be quite reasonable: the budget should finance not the government machine maintenance, but the improvement of specific measures parameters in the spheres of education, healthcare, quality of public administration and other spheres. To this end, it is necessary to approve the relevant state programs that specify the steps to improve the concrete target indicators. However, it turns out that the financing of these progressive programs in the three-year budget is not growing, but is shrinking, Tatyana Golikova, head of the Accounts Chamber, noted, in particular. Only 58% of the federal budget spending is intended for the state programs in 2014. And in the following years, it is planned to cut the share of the state programs in the total expenditures: in 2015 - to 56.2% and in 2016 - to 54.9%.

There is a similar situation with the openness of the budget. Vladimir Putin has urged the society to control government spending: “We should more actively use the societal oversight tools in the budget sphere. When everything is open ... and transparent, the unreasonably high prices and strange, sometimes even ridiculous terms of public procurement become immediately obvious.”

In practice, the number of open items in the budget is constantly shrinking and the number of the closed ones - i.e., out of the reach of full control - is increasing. The share of classified budget expenditures has grown over recent years form one-tenth to a quarter.

A too optimistic forecast for GDP growth, which is laid down in the three-year draft budget, is also striking. So, next year’s GDP is to grow by more than 10% in nominal rouble terms. This rate is directly fixed in the budget bill. But how the desired 10% in nominal GDP growth can be achieved given the projected inflation rate of 5% and the current economic growth pace of 1.5 percent per year? Judging by the text of the law, the authorities hope that next year’s economic growth rate will double. However, this assumption seems unrealistic today, the Nezavisimaya Gazeta newspaper writes.

As for officials, they prefer to use, instead of “unrealistic,” more diplomatic language - “too optimistic,” which, in general, does not make a great difference. The newspaper quotes head of the Russian Central Bank Elvira Nabiullina, who called the three-percent economic growth forecast for 2014 too optimistic. However, this forecast is offset in the budget by the nominal government spending planned increase not by 10% in 2014, but by only by 5%. That is, given the expected rate of inflation, the government spending in 2014 is actually frozen at the 2013 level.

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