Center for Strategic Assessment and forecasts

Autonomous non-profit organization

Home / Economy and Finance / Causes and nature of the current crisis / Articles
"All will be shrinking"
Material posted: Publication date: 15-09-2013

Russia decided to tighten the budget belt tighter – at least for the next three years. Costs will be reduced by 5%. Victims of the slow growth of the economy will become expenses of the Ministry of defense and of natural monopolies, the appetites which it is already decided to cut back. However, in power there were alternative ways of optimization of slimming the budget.

Prime Minister Dmitry Medvedev said that in the next three years "extra money". Therefore, the expenditure budget will be reduced between 2014 and 2016 by 5% on all articles, except protected articles social. That is, it will not affect expenditure on pensions, scholarships, etc. However in certain cases the reduction can be more, warned Medvedev.

The Minister of economic development Alexei Ulyukayev did not rule out that the government can reduce 5-10% of unprotected budget in the next three years.

Finance Minister Anton Siluanov said that the budget manoeuvre is to evenly reduce costs by 5% across the full range of ministries and agencies, in addition to the mandatory social spending. Collected from this reduction funds will be used for priority projects that the government will determine in the near future. Thus, the funds will be redistributed among individual spending categories. According to him, the exact number of cost redistribution has not been determined, "it varies from 100 to 300 billion rubles."

"Everything will be shrinking in the public sector, this applies to natural monopolies, it is, in fact, will affect all those who carry out public procurement and receives funding from the Federal budget," Siluanov said.

"Each of the items of expenditure of consolidated budget, except for secure, can be audited, and the least priority of the program may be suspended or are partially reduced funding," explains the essence of resiliencylink of the markets analysis Department of a DB "Opening" Konstantin Bushuev.

Medvedev explains the need for cuts because the budget is in difficult conditions – the volatility in world markets, the economic slowdown in Russia and other countries. The economic development Ministry in late August downgraded all the main macroeconomic forecasts for 2013, and over the next three years. The economy will grow, as expected, 2-3%, but not more than 4%, which means a reduction of revenues.

According to the Ministry of Finance, two years – 2014 and 2015 – budget expenditures will exceed revenues by 400 billion rubles. In 2016 it is expected the situation is worse – waiting for deficit to 600 billion roubles. For comparison, previously, the deficit in 2014 is expected to be only about 200 billion rubles, and in 2015 the General budget had to be balanced.

That will reduce

Siluanov said that at the meeting with the President was able to negotiate with the Ministry of defence about transfer of part of the procurement under the state program of armaments (GPV) at a later date. Work is also continuing on possible further optimization of these costs. On the LG pledged 19 trillion of spending by 2020. This Siluanov declined to identify the expenditure that will be transferred.

Previously, experts considered that the budget could save between 250 billion to almost 1.2 trillion rubles in the next three years on the transfer at a later date part of the costs of GPV. The work of the experts was published on the website of the Ministry of Finance, but this proposal was not included in the number of supported Agency. However, that measure was completely rejected and was classified as "relevant".

The experts explained that you can save if you reduce the aim of the programme: to equip the army with modern weapons by 70% by 2020, as proposed in the document to 50%. And it will be the level of leading foreign countries. Plus experts doubt that DIC will be able to increase production as quickly as suggested in the programme of arms, as well as citizeny on military products will be shown such rapid growth as recorded in the program.

Plan TAG – the increased production of DIC is 15.8% per year in the growth of prices for military products by 10.5% annually. The experts also felt that the MIC really can increase output only by 10% per year, while the price of military goods will grow more modest 5.7% (in 2014 at least). Therefore, the defense sector will not be able to master in the next three years all the funds that it plans to spend under the state program.

So tighten the defense Ministry would be possible without any serious losses. Depending on the difference of planned and actual growth of output and planned and actual growth of prices for military products and was calculated such budget savings over three years – from 250 billion to almost 1.2 trillion rubles.

Anything make also a natural monopoly. The MAYOR on Monday offered to freeze in 2014 growth of tariffs of Russian Railways, JSC "rosseti" and Gazprom for commercial users and for the population. In 2015 the increase will occur but will be limited to the inflation rate last year and should be no more than 5%. Saving budget on this one, thought the speaker, 420 billion rubles in 2014-2016. And lost income of natural monopolies, he believes, will force companies to optimize their costs. In addition, this step just push economic growth and reduce inflation, Ulyukayev believes. Before this proposal the MAYOR was supported by the President.

As the newspaper VIEW, the Ministry of Finance techieportal a number of measures to optimize the budget rather technical nature. At the same time refused a number of proposals of experts – for example, to declassify some unreasonably classified expenditure items, in particular 11% of secret expenditures in the housing sector.


"Uniform cut of budget is unlikely to be the best option, but, on the other hand, it can be the fastest and compromise", – says Konstantin Bushuev.

However, the government were and alternatives to reduce costs by 5%. "The main one was the extension of borrowing by the budget for the current year. But the government, on the one hand, does not see a favorable external environment for the current volume of the bond, on the other hand, in the conditions of uncertainty of further dynamics of the global economy, the tightening of budgetary belts is reasonable", – says Konstantin Bushuev. "But in any case such belt-tightening could further slow the pace of economic growth in the country," he warns.

The Minister for Open government Mikhail Abyzov found a reserve for optimization of budget spending without cutting social programs toreduce the cost of procurement for optimizing them.

"Federal contract system, which will enter into force on January 1 provides for such possibility including by rationing of expenses, the decline in the share of the cancelled auction and so on. Experts estimate Economics, economic impact of reducing the number of failed trades may reach 300 billion rubles a year", – said Mikhail Abyzov.

He cites a successful example of this year: the introduction of Federal contract system in Russia at the first stage allowed the Corporation to reduce costs by 10%, and the second – on 35%, the expert points out.

Another way to reduce the cost of public procurement is to promote competition. "According to the chamber, today 70% of major procurements (over 1 billion) are made from one supplier. Competition is the cost of goods, lower costs, increase quality. HSE experts have estimated savings of the state in 170 billion rubles", – said Mikhail Abyzov.

In addition, the expert points to the need to reduce the costs of natural monopolies, which will also help to optimize the budget. "On the Open government, the concept of the mechanism of public control over investment programmes and tariffs of natural monopolies. A roadmap was submitted to the government. The first step is the formation of consumer councils, which will control the investrashodov, including major construction projects. Due to the publicity of this process of non-core costs of natural monopolies must be reduced, and the cost of the investment program is optimized", – said Mikhail Abyzov.

Olga Samofalova


RELATED MATERIALS: Economy and Finance
Возрастное ограничение