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Sunday, February 25, 2018

Military field budget

At the parliamentary hearings on budget, tax and customs tariff policy of the Russian Finance Minister Anton Siluanov warned that once the Treasury deficit from the current 4% will be reduced to 1% of GDP, the surplus of the government to fight, as it was before, will not. But more importantly, Siluanov aloud deputies said military spending over the next three years, the Finance Ministry proposes to cut by a whole 1.1% of GDP.

photo: Gennady Cherkasov

Anton Siluanov at the hearings in the state Duma was very careful. Basically he was saying what and it is written in the draft main directions of budget and tax policy. Financing of the defense industry in General, he touched on a tangent, saying only that the President’s task of equipping the Russian army with modern equipment and weapons to 70% by 2020 will be fully implemented and on time.

No one doubts. Another thing — at whose expense, considering the fact that the crisis has never left, reducing GDP growth (in small quantity) will start at best in the coming year and, accordingly, the budget deficit this year, according to Siluanov, has reached 4% of GDP. The 2016 budget, by the way, based on 3%. We are talking about a deficit of almost 1 trillion roubles.

To cut to the quick social spending Siluanov nobody will. And so the deputies of the state Duma every time when he appears on Okhotny Ryad, recall that state support of health and education is not non-productive costs, and promising investments in the so-called “human capital”.

Apparently, therefore, the Finance Ministry proposes to significantly reduce the costs of the defence industry. In the project “Basic directions of budgetary policy for 2017-2019” it is recorded that during these three years, defence costs are reduced from 3.9% of GDP (the level of 2016) to 2.8% in 2019.

But these figures Siluanov, speaking at a recent parliamentary hearing, did not quote. Apparently, such drastic cuts in the military budget have not been approved at the top. Recall that the first discussion of the draft budget 2017–2019 must pass in the Cabinet meeting only on October 13.

Do not forget that Siluanov’s predecessor, Alexei Kudrin has lost his post in 2011, primarily due to disagreements with the security forces about their enhanced funding.

But, apparently, the ice was broken. To give almost the entire Federal budget to the people in uniform have long been impossible. Revenues are fading away due to the fall in oil prices. Of course, the tax authorities do literally miracles. According to the head of FNI Michael mishustina for the first 10 months of this year, tax revenues increased compared to the same period last year by 1%. And if you consider only non-oil revenues (it is necessary to get off the oil needle) % 4-5. But still this year to combine “the debit with the credit” impossible, if not to find at least 3 trillion rubles. In the future situation does not improve for the better. So someone will have to tighten the belt. Whether it’s war, discussions in the government and the state Duma will show.

And here appears a new problem. The budget deficit is enormous. In the “fat” years, we used to live with a surplus, sending “extra” money in the oil stabilization funds that are placed, as a rule, valuable American papers.

Many experts then criticized the author of this idea Alexei Kudrin for what is earned by honest means artificially removed from our economy. Further crises have shown that this stash came in handy. But now the whole world economy is changing. To fasten your car to the greater innovative train, have to change the current resource model.

Which means more to spend budget money for priority state projects. On the one hand, due to the return of fiscal rules (all revenues in excess of $40 per barrel, to the Reserve Fund) may be something to accumulate. But more important than that. Future costs of the budget should be planned not on the basis of arithmetic is possible, based on necessary for development. Therefore, Silvanus and said that after the budget deficit will be reduced to 1% of GDP (planned for 2019), he will be left in this size. No need to “burn” the surplus, and to direct them to the GDP growth.

In General, you need a budget compromise. But whether he really achieved is not clear.


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