Translated material
We'll cut!
The government can significantly reduce budget expenditures in 2009
The government is preparing to significantly cut federal budget spending, First Deputy Prime Minister Igor Shuvalov admitted yesterday. He spoke at a meeting of the Russia 2009 forum. The speech itself was closed to the press, but, as those who were allowed to hear it later told reporters, it was about how the budget approved just a few months ago turned out to be too ambitious for times of crisis. “We have decided to significantly reduce government spending. They will be approved in the near future,” RIA Novosti quotes Mr. Shuvalov as recounted by one of the listeners.According to the First Deputy Prime Minister, at the end of 2008 the government planned expenses and revenues based on a completely different price environment. Currently, oil prices, the basis of Russian incomes, are around $40 per barrel. Speaking at a government meeting on January 19, Minister of Economic Development Elvira Nabiullina said that the updated forecast of socio-economic development, which is now being prepared by the ministry, will be based on the average annual price of a barrel of oil of $41, while the 2009 budget was calculated based on $95 per barrel. Expenses in it are planned at the level of 9.025 trillion rubles, revenues - 10.9 trillion rubles, surplus - 1.9 trillion rubles.
However, life has shown that long-term planning in modern conditions is no more effective than fortune telling on coffee grounds. And it is practically impossible to comply with the parameters of not only a three-year budget, the transition to which was recently presented as a great achievement, but also a regular annual one. Now we are not talking about the size of the surplus, but about how large the budget deficit will be. Igor Shuvalov only suggested that it would be less than 10% of GDP, as many experts promise.
But even despite the difficult times, the main financial document could remain unchanged. According to Mr. Shuvalov, in 2009 the government could have gone through a difficult period and not cut budget expenditures using the reserves accumulated over the years of favorable foreign economic conditions. However, such a policy, according to the First Deputy Prime Minister, would be irresponsible. “The most important thing for us is macroeconomic stability,” he uttered the most popular mantra in the government’s economic bloc.
True, another deputy prime minister said yesterday that they will still resort to money saved for a rainy day. Russia does not yet plan to resort to external borrowing, and the entire deficit will be covered from the Reserve Fund, Deputy Prime Minister and Finance Minister Alexei Kudrin said at a press conference following financial consultations with British colleagues in London.
Ideally, the government will strive to balance expenditures and revenues with a zero deficit. “We have revealed the budget obligations. Expenses will either be reduced or canceled on many items,” said Mr. Shuvalov. Details of spending cuts and the planned budget deficit will be announced at a government meeting on Thursday, Mr. Shuvalov said. According to him, the reduction will be significant.
The head of the expert council of the public organization “Business Russia”, Anton Danilov-Danilyan, believes that when cutting costs, first of all, it is necessary to seriously address the structure of public administration, which clearly has many unnecessary links in ministries and departments, as well as in unitary enterprises. There are many functions that can be transferred to self-regulatory organizations without any damage. “In addition, it is necessary to freeze a number of investment programs, especially those focused on business needs. Such programs, mostly infrastructure ones, are financed by the Federal Targeted Program, the Federal Investment Program and the Investment Fund. But business now has no money for large-scale projects, so there is no need for the state to spend money on it. It is necessary to seriously reconsider the items of expenditure on national defense. Naturally, it is impossible to completely freeze the modernization of the army, but, obviously, there are projects there that can be postponed for a couple of years,” Mr. Danilov-Danilyan told Vremya Novostei.
The chief economist of the Trust National Bank, Evgeniy Nadorshin, believes that a revaluation of the budgeted cost of payment for work and services will greatly help reduce budget expenditures. “Since October, wholesale prices have been declining, consumers cannot notice this, retail prices, on the contrary, are rising, but the budget is not purchased at the supermarket,” said the Vremya Novostei expert.
The only question is which path the White House will take. In the morning, Mr. Shuvalov said that this issue would be discussed at a government meeting today. However, such an issue is not listed on the agenda of the meeting, published the day before on the government website. Cabinet members will discuss measures to improve the financial sector and certain sectors of the economy, the project for creating an international financial center and approve the rules for providing subsidies to federal subjects for the development of social and engineering infrastructure.
A government source explained why the issue of parameters for reducing budget expenditures in 2009 was not included in the agenda of the cabinet meeting. “In my opinion, the updated federal budget should be based on an updated forecast of economic development. As far as I know, no decision has been made on it and there is no information that it has been received,” the source said. He noted that the government instructed the Ministry of Economic Development to submit an updated economic development forecast for 2009 by February 9. Elvira Nabiullina’s department confirmed to Vremya Novostey that the forecast has not yet been submitted to the government, but found it difficult to answer when it would arrive there.