Translated material
An autopsy will show
The President unpacked the Fund for Future Generations
The country's leadership has set a course for a new increase in budget spending in the pre-election year. This became clear after Vladimir Putin announced his next message to the Federal Assembly yesterday in the Kremlin . Moreover, the appetite is so serious that budget revenues will not be enough for the expenses announced by the president: part of the funds is expected to be withdrawn from the stabilization fund. According to experts, additional expenses , and they will increase by almost 12% compared to the amount fixed in the federal budget (5.46 trillion rubles), may have a negative impact on the inflation rate.Yesterday at a government meeting, which took place two hours after the president announced his message, Finance Minister Alexei Kudrin already expressed concern about rising prices. The minister said that he does not guarantee the fulfillment of the inflation forecast for 2007 at the level of 7-8%, in particular, because in April the rise in consumer prices will exceed the level of April last year. He linked this to the high growth rate of the money supply in the first quarter. The implementation of the president’s orders, which, according to the expert department of the president Arkady Dvorkovich, will cost at least 650 billion rubles this year alone, will further increase the amount of money in the economy. True, it seems that so far only Mr. Kudrin among high-ranking officials sees the inflationary danger , or only he dares to speak about it publicly.
Arkady Dvorkovich yesterday at a press conference argued that an increase in budget expenditures in 2007 will not lead to an increase in inflation, since most of this money will not be spent this year (what will happen next year with inflation targets is already 6--7 %, he kept silent). At the government meeting, Mr. Dvorkovich was echoed by the head of the Central Bank, Sergei Ignatiev, who said that inflation would be about 8%.
“Don't forget that this is an election year . One of the persistent arguments of the left opposition, which is actually the main opponent of United Russia, is that the government does not finance the economy, the economy is suffocating without money, enterprises are stopped, people are without work. The government must spend more. I think that the authors of the message in this part (increasing budget expenditures - Ed. ) proceeded precisely from this kind of considerations in order to remove criticism,” Vladimir Tikhomirov, senior economist at the Uralsib financial corporation, told Vremya Novostey.
Additional funds in the amount of 350 billion rubles, received from rising energy prices, improving tax administration and from the sale of YUKOS property, will be used for road construction, the functioning of the housing and communal services reform fund, and a number of other areas. In turn, 300 billion rubles, which will be withdrawn from the stabilization fund, are expected to be used to establish development institutions. In particular, the Development Bank, into which VEB is being transformed, will receive 250 billion rubles for capitalization, the Russian Venture Company - 15 billion rubles. At least part of the remaining 35 billion rubles. will end up in an investment fund.
Apparently, now the main question for the government is how to spend this money , as they say, wisely. “Experience shows that using a lot of money at once is not easy . Let's take an investment fund. In 2006, out of the allocated 69 million rubles. 9 million rubles were used. This year, according to the Ministry of Finance, out of 110 million rubles. 59 million rubles will be used,” Yevsey Gurvich, head of the Economic Expert Group, told Vremya Novostei. “If we could be confident that we could spend it effectively, then that could be supported. But so far our experience in this area is either negative or limited,” he states.
A reduction in the volume of the stabilization fund will lead to a reduction in the fund for future generations, which, together with the reserve fund (its standard value next year should be 3.5 trillion rubles, or 10% of GDP), will replace it in 2008. Just 300 billion rubles. Yesterday, Vladimir Putin essentially renamed the Fund for Future Generations into the National Welfare Fund. Moreover, he not only renamed it, but also, it seems, changed its concept. “According to the original idea, it was supposed to be a long-term stability fund, it was supposed to smooth out long-term fluctuations in oil prices, which were in the 70s - the first half of the 80s, in contrast to the reserve fund, which is designed to smooth out the consequences of short-term, such as in 1998,” recalls Evsei Gurvich. The fund's funds were supposed to be invested in highly profitable but risky assets, for example, in company shares.
Now the fund, having not existed even a day, has already lost 300 billion rubles, and now its volume as of January 1 of next year will be 441 billion rubles. (with forecast oil prices for this year at $55 per barrel). In addition, it was decided to allocate part of its funds to pension needs. In the future - to cover the deficit of the pension system (“if one does arise,” the president specified), and in the near future to co-finance voluntary pension savings. “For every thousand rubles of a citizen’s voluntary contribution, the state must add another thousand rubles to his personal savings account in the Pension Fund. And, naturally, in order for these contributions not to depreciate over time, they must be invested, providing the necessary profitability and reliability,” the message says. “This is a smart way to boost private savings in the pension system, because the government will still need to subsidize the Pension Fund. But we can designate these subsidies as 50% co-financing of private investments. This will seriously increase the volume of the Pension Fund and, accordingly, will provide it with serious assistance. People will benefit from this,” says Vladimir Tikhomirov.
However, for now, as Evsey Gurvich, for example, believes, “the idea of how to use the fund’s money to support the pension system is very crude.” Indeed, the government has to resolve many issues, for example, to begin with, determining the maximum amounts of co-financing, as the president said, “for a fair distribution of funds between different social groups,” as well as investment mechanisms. On the one hand, the president calls for increasing pension savings through effective investment; on the other hand, it is necessary to ensure their safety. The first requires more risky investments, for example, in the same shares of companies, the second requires more reliable ones in government securities, on which you “can’t make a lot of money.” Evsey Gurvich recalls that last year in the state management company - Vnesheconombank - the return on investment of pension funds in nominal terms was 5.7%, that is, in real terms it was negative. Apparently, that’s why Vladimir Putin refrained from giving specifics yesterday. “Moreover, the fund’s financial resources themselves must be increased to such volumes that the assigned tasks can be solved using income from their effective placement. I won’t give specific numbers now. The government is afraid if I name them, but they know how much it is,” the president said.
It is clear that Russians cannot help but be pleased with Vladimir Putin’s new initiatives related to increasing budget expenditures for the development of the social sphere. The country will find out at the end of the year how they will affect the Russian economy and the lives of citizens. Just before the State Duma elections.