An Entire Complex of Sources is Available to Increase Expenditures on Human Capital

If sources of funding of additional expenditures proposed by the CSR within the framework of human capital: education, healthcare and infrastructure are concerned, the two main sources can be named. It is to be noted that they have nothing to do with making the rates and tax burden higher for the business.

Firstly, it is a “budget maneuver” which suggests redistribution of those budget items on which reduction of expenditures is planned -- defense, inefficient economic subsidies, law enforcement agencies and state governance – in favor of productive expenditure items: education, healthcare and infrastructure.

Secondly, it is a budget rule easing which suggests establishing of a higher cut-off price: if this price is exceeded, the oil and gas revenues are directed to the National Welfare Fund with limitations on the expenditure side of the budget set. The price of oil beyond which a portion of revenues from oil exports is directed to the National Welfare Fund may be not $40 a barrel, but $45 a barrel which is also below the current oil price expectations. In other words, the budget rule is still based on the conservative forecast of the price of oil. However, this $5 difference will yield about 0.5 p.p. of GDP.

In addition, the Ministry of Finance may upgrade fiscal performance. For example, thanks to efficient administration it became feasible to increase by almost 1% of GDP the consolidated budget revenues, said the RF Finance Minister at the Gaidar Forum.

Also, borrowed funds can be utilized as an expenditure funding source provided that interest rates are reduced. Borrowings can be made in terms of government bonds and revenue-yielding bonds or mortgages.

Generally, there are plenty sources and instruments. Proceeding from the current market conditions and macroeconomic situation, it would be prudent to use a combination thereof.

Sergei Drobyshevsky, Academic Director, Gaidar Institute