Translated material
State Arithmetic
The Ministry of Finance will support Concept 2020 with its fifteen-year budget
Yesterday, participants in a press conference organized by the Ministry of Finance tried to “find the difference” between various long-term strategies. The fifteen-year budget is no less important than Concept 2020 , Oksana Sergienko, director of the Ministry of Finance department, tried to assure yesterday. Long-term financial planning, she said, should further strengthen the focus of fiscal policy on achieving sustainable economic growth. To achieve this, the Ministry of Finance is ready to use all the tools available to it: government spending, monetary and tax policy.The Ministry of Finance is now preparing not only one- and three-year budgets, but on August 1 it will also present the state’s financial plan for 2009-2023. The document will take into account several scenarios, depending on oil prices and the development of the demographic situation. According to the original logic, such a distant planning horizon is necessary if the state begins to set itself new global goals. But it seems that so far all the efforts of the financial department, reflected in the fifteen-year budget, are aimed at more pressing current tasks today, such as reducing inflation while maintaining high growth rates.
“Our main task is to balance high rates of economic growth and low inflation,” Ms. Sergienko said yesterday. Now all the factors on which the achievement of the goals depends are acting in the opposite direction. In Russia, domestic supply and demand are extremely unbalanced - the former is twice as much. Partly for objective reasons: high oil prices and, as a consequence, a large amount of money in the economy. Partly due to subjective factors: in the form of increased government spending or large external borrowings by companies.
The Ministry of Finance is most concerned about the situation with inadequate supply and demand. “The inevitable consequences of this are inflation and a slowdown in economic growth,” says Ms. Sergienko. To change the situation, you need to purposefully influence the components of supply and demand. This is precisely the goal that the Ministry of Finance sets for itself, of course, within the framework of the powers vested in it.
First of all, the ministry intends to move to a tighter monetary policy aimed at regulating the flow of money into the economy. Despite the fact that in previous years a significant part of the money was withdrawn through the stabilization fund, monetary policy, according to Ms. Sergienko, was “very soft.” Now the Ministry of Finance will insist on taking more stringent measures. The Central Bank supports him in this. “The President set a goal of reducing inflation to 3% per year, for this we had to reduce monetary inflation (without taking into account seasonal factors and regulated tariffs. - Ed. ) by 1% annually. But last year, price growth due to monetary factors alone amounted to 6.7%, which is 1% more than in 2007,” recalled a representative of the Ministry of Finance. This year, a net inflow of capital is expected to be no less than the level of 2006, when we received $41 billion.
Secondly, the ministry has its own idea of the optimal amount of government spending. “Expenditures should grow at a rate comparable to GDP growth. And last year, when the economy grew by 7%, the increase in expenses was 17%,” Ms. Sergienko noted. According to her, the Ministry of Finance will include in financial plans a gradual slowdown in the growth rate of expenses in the next three years.
With external borrowings by companies - the third factor - everything is more complicated. They have already reached 34% of GDP, last year it was 31%. But the Ministry of Finance does not yet intend to introduce control over external loans of companies and banks. Although, according to Ms. Sergienko, the ministry takes this situation into account when preparing the financial plan. Another problem: with growing bank loans, investment in fixed assets grows much more slowly, which clearly indicates non-core and ineffective expenses.
The representative of the Ministry of Finance did not voice plans to regulate another important component of economic growth - supply. Apparently, it is assumed that the Ministry of Economic Development will continue to be responsible for this. “The development of Concept 2020 has been and remains the responsibility of the Ministry of Economic Development,” said Ms. Sergienko. This project is much broader than the financial plan, but there are certain “intersections”. The Ministry of Finance sets the task of strengthening the role of the state in those areas “in which not enough is currently being done.” These, according to the director of the department, are primarily budgetary sectors and the pension system. But it seems that financiers do not intend to help the Ministry of Economic Development. The VAT reduction, which is declared by Ms. Nabiullina’s department as the most effective measure to stimulate economic growth on the supply side, is still not supported by the Ministry of Finance.