Translated material
Strong economists
The word "sequestration" was pronounced at the Moscow City Hall
Ten years after the 1998 default, Muscovites will have to remember another frightening economic term that came into use at that time. City authorities, in the context of the unfolding financial crisis, will use the so-called sequestration mechanism, or cost reduction, to hedge against a likely decline in city treasury revenues, a significant share of which is made up of tax revenues from oil companies. The other day, the mayor signed an order providing for “savings in city budget expenses in the amount of at least 5% of the amount of budget allocations not spent as of October 1, 2008.” Considering that at the beginning of July the surplus of the city treasury exceeded 140 billion rubles, in general, current city liabilities could be reduced by 7 billion rubles. The sequestration of the 2009 budget, which was still adopted by the Moscow City Duma in the first reading, will apparently be more significant. As Igor Antonov, chairman of the budget and financial commission of the city parliament, told Vremya Novostey yesterday, most likely the city treasury will be short of 150-200 billion rubles.It was precisely this amount of arrears of budget revenues due to the fall in oil prices, which brings Moscow up to 10% of tax revenues, that was announced last week, when the capital’s mayor’s office began to preliminarily calculate the likely losses. But this figure is not final - Mr. Antonov believes that it will take at least three weeks to clarify the new parameters of Moscow's budget for 2009. According to him, the Moscow authorities will recalculate the income and expenditure items of the city budget after their federal colleagues adjust the program of socio-economic development of Russia for 2009-2011, taking into account the possible consequences of the global financial crisis. “The amendments are under development, and until the Ministry of Economic Development has published macroeconomic indicators, I cannot predict anything,” the head of the economic department referred to the fact that Moscow lives according to “all-Russian economic rules.” politics and city development Marina Ogloblina.
In addition to the inevitable reduction in tax revenues from oil companies, the mayor's office, apparently, will have to voluntarily give up some other items of income. In particular, as Mikhail Vyshegorodtsev, head of the department for support and development of small businesses, said last week, the city intends to refuse to increase rental rates for non-residential premises from January 1, 2009. Yesterday, the head of the city’s land and property complex, Vladimir Silkin, at a regular meeting of the city government, also proposed to halve the allocation of part of the net profit of state unitary enterprises belonging to Moscow next year. According to him, half of the planned 2 billion rubles. deductions that will be used to replenish working capital and implement investment programs will provide SUEs with significant support. In addition, he considers it advisable to lift the 20 percent restriction on subletting space of state-owned enterprises for a year. “If, in a crisis, the demand for enterprises’ products falls and capacity is freed up, we should be allowed to rent them out to compensate for losses,” said Mr. Silkin.
As for expenditure items, officials do not specify which city obligations will be sequestered. However, Mayor Yuri Luzhkov assured yesterday that the city's social programs will not be affected by the planned cuts in allocations. “I want to announce that the Moscow government continues to confidently pursue its social policy,” the mayor emphasized. “It’s important to say right now, when many publications are appearing, that everything is failing and becoming more complicated everywhere.”
The Moscow City Duma expects that next year’s budget will remain socially oriented. “We will not cut expenses in the social sector: additional payments to pensions, child benefits and other social expenses,” Mr. Antonov is confident. The fact that the position of the Yabloko-United Democrats faction when considering the new version of the draft budget will directly depend on this was stated by the head of the Yabloko party, Sergei Mitrokhin, who has repeatedly criticized the developers of the city’s main financial document for excessive investment expenses. “We did not support the project in the first reading precisely because of yet another incredible expenditure on extremely incomprehensible projects, such as the purchase of land abroad, the construction of airports in other regions,” Mr. Mitrokhin told Vremya Novostei. According to the oppositionist, his attempts to find out whether at least part of Moscow’s numerous investment projects will be curtailed during the crisis were unsuccessful. “Apparently, there is a feverish showdown with the lobbyists of these projects,” Sergei Mitrokhin suggested the reason for the reluctance of officials to advertise their plans.
Let us recall that according to the draft three-year budget, city treasury revenues in 2009 were supposed to amount to 1.53 trillion rubles, and expenses - 1.66 trillion rubles. Thus, the deficit should have been 133.5 billion rubles. The increase in spending on the “social policy” sectors is set at 204.3 billion rubles, or 42% of the current one. And investment expenses were initially supposed to amount to 620 billion rubles. In particular, more than 30 billion rubles. it was supposed to be spent on contributions to the authorized capitals of companies that are strategically important for the development of the urban economy.
Part of the deficit was supposed to be compensated by Moscow's government debt, which in 2009 should reach 206 billion rubles. Let us recall that the dominant segment in its structure has traditionally been city bonded loans. But if earlier the capital’s financiers, due to consistently high budget revenues, could afford to refuse domestic market borrowings and relied on long-term bonds, now Moskomzaim is trying to attract at least short-term money. The draft amendments, which allow the use of long-term city securities to carry out operations to attract borrowed funds by the mayor's office for short periods, should be submitted today for consideration by the Moscow City Duma. As the chairman of the city’s state borrowing committee, Sergei Pakhomov, explained to the deputies at a preliminary discussion of the document, in the context of the emerging instability in the financial markets, successful attraction of borrowed funds may be possible only for a short period - up to six months. Igor Antonov assured the Vremya Novostei correspondent that deputies are ready to give Moskomzaim the opportunity to “quickly raise money.” According to him, the mayor's office is being forced by the crisis and lack of long-term financial resources to deviate from the policy aimed at extending the circulation period of issued securities. “If there were long-term money, we would place bonds for two, three, five years, but there is none,” Mr. Antonov complained.
However, the deputies, apparently, do not have much hope for short-term money. “If tomorrow there is a liquidity crisis, then it will be impossible to use this topic at all,” said Igor Antonov, adding that he is afraid of “guessing on the tea leaves, because money loves counting.”