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Tuesday, October 25, 2016

The budget deficit rose to 8.6% of GDP

In April the budget deficit in our country increased to 8.6% of GDP. And it is against planned for current year maximum 3%. However, the problem for the majority of Russians are pure virtual. Argue about it a lot, but in fact, nobody has seen her alive. And well. Notable budget deficit requires quick decisive action. Usually aggressive towards people. Be the first to fall under the cuts in social expenditure, because it can be done almost instantly. This measure is effective, but usually one of the last in the list is applied.

photo: Natalia Muslinkina

Over the past four months, the ruble has appreciated against the dollar by 20.7%. Because of this, the work of the Ministry of Finance of the stabilization of the budget deficit has become extremely difficult. You have to close a massive hole in the Treasury, and where they should not be. Today the situation with the budget deficit worsened. According to preliminary data of the Ministry of Finance, deficiency of the main financial document of the country for Jan–April 2016 exceeded to 1.23 trillion rubles. This is 4.7% of GDP against planned for the current year maximum 3%. At the same time, budget revenues for the same period are estimated at more than 3.9 trillion rubles, and most of them are not oil and gas revenues. Obviously, spending the Treasury are rising, and it’s hard to do something right now.

Winter rates were relatively neutral, but in April the implementation of the budget has faced serious challenges. According to Finance Ministry estimates, the budget was executed with a deficit of 8.6% of GDP. And this despite the fact that the Agency in the past month vigorously sold dollar-denominated assets to rubles received by the close of the financial vacuum.

All these figures indicate that nationwide revenues still lag behind expenses. The difference is expanding all the time. During the negotiation of the 2016 budget, the authorities have cut expenditure in a number of ways: from financing to the housing sector to the military-industrial complex. Almost full five months of this year show that the measures applied were insufficient.

Cut all social spending is too risky, but here the authorities did what they could. Indexation of pensions in 2016, while 4% with inflation at 7.3%, the second indexation is scheduled for August, but nobody says how much it will be. Indicators of increase in pensions could well be symbolic and in fact does not improve the life of pensioners. The same applies to other social benefits. You can complete the “epic” with the parent capital, but it is too socially significant moment, in addition, the program is working effectively. A list of grants and then cut the requirements for recipients are becoming tougher, the payouts below. It is obvious that the social spending to cut have nowhere to go.

It would seem that you can “cut off” part of the cost of the military industrial complex — they are still very few people see. Yes, the sector is closed from prying eyes, but that doesn’t mean there’s nothing going on. State spending on the military-industrial complex contribute to the activity of the sector in total industrial production. Is another story with a number of jobs, unpreserved industries and industrial pride of the country.

There are still the costs of bureaucracy — they slashed subsidies to the regions cut spending on infrastructure projects left only vital. The excise tax on fuel was raised to increase the tax burden officially can’t, because the Prime Minister holds that point on the control. Actually, that’s all, nothing more to cut.

The deficit is a vacuum, emptiness, lack. This gap needs to be closed if it is more than acceptable size. Before the state Duma elections in September 2016 in the major financial indicators should be stability, that everyone knows. So, the Finance Ministry has only three months to bring the budget in presentable.

The easiest way to reduce the budget deficit — to weaken the ruble, allowing the dollar to strengthen in region 72 to 74 rubles. The budget deficit will be reduced by about 0.7–0.8% — those numbers with which you can start to work. Exporters and the Ministry of Finance would be a comfortable level to 74-78 per dollar. Therefore, controlled devaluation of the ruble at the present time is an optimal mechanism. Especially as market conditions allow to do it.

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