GEORGY MALGINOV: ”CURRENTLY IT IS DIFFICULT TO CONCLUDE IF THE EXISTING FORECAST OF PRIVATIZATION INCOME IS SUFFICIENTLY REALISTIC”

The annual amount of federal budget revenues to be generated by federal property privatization is expected to be Rb1.5 bn. Their role in financing the federal budget deficit will be minimal: in 2023-2025, the expected privatization income will amount to no more than 0.1% of the funds to be attracted through government borrowing. The projected annual proceeds (Rb1.5 bn) are approximately 1.7 times higher than the amount stated in the current forecast privatization plan (program) for 2022–2024 (approved by RF Government Edict No. 3993-r dated December 30, 2021) (Rb0.9 bn for 2023). As far as the year 2024 is concerned, the edict offers no specific figure, while referring to the revenue projections based on the alterations introduced into the forecast federal property privatization plan (program) in 2022. For reference: the initial version of the privatization program for 2020–2022 provided for annual revenues in the amount of Rb3.6 bn, while in its current version adopted for 2022, the projected figure is Rb3.9 bn.

It is difficult to assess the realism of the privatization revenue projections in the context of the new economic and political situation that has been evolving this year, especially beyond 2023. At the same time, it must be borne in mind that the stated annual amount of budget revenue does not include the funds that can be potentially yielded by the deals involving shares in biggest companies that can be privatized on the basis of special decisions of the President of the Russian Federation and the RF Government, with due regard for market conditions and recommendations of leading investment consultants. For 2022–2023, it is planned that the government should withdraw from the authorized capital of Makhachkala Commercial Sea Port JSC.

For 2023, the revenues from the use of state-owned property entities are projected at Rb929.0 bn. Throughout the period 2023-2025, the main source of these revenues (58% to 67%) will be dividends.

For 2023, federal budget revenues in the amount of Rb544.1 bn are projected to be generated by profits from the stakes in the authorized (share) capital of business partnerships and joint-stock companies or dividends on shares held by the Russian Federation (including dividends from PJSC Sberbank), which is Rb306 bn less than what is expected to be received this year. However, that dip should be almost completely compensated during the next year (2024). An increase of more than 1.5 times (to Rb845.2 bn) is forecast, to be followed by a slight drop of 2.6% in 2025 (to Rb823.6 bn).

At the same time, in contrast to several previous years, the explanatory note offers no assessment of the impact on the total amount of dividend receipts of certain individual factors (the dynamics of the net profit of companies, the adoption of specific decisions concerning the payment of dividends by some of them).

The achievement, in 2024–2025, of the figure amounting to Rb0.8 trillion on the back of the all-time high (Rb441.6 bn) achieved in 2019 and the subsequent movement pattern of dividend receipts (in 2020, a plunge by 4.3% to Rb422.7 bn; and in 2021, by 19.7% to Rb339.5 bn) appears to be rather problematic. Of course, over the past decade, there were indeed some increases in the dividend receipts in the budget in amounts comparable to what is predicted for 2024, or even higher than that (for example, in 2012, 2014, and 2019). However, the situation in the economy during those years can hardly be extrapolated to that after this country’s involvement in an armed conflict.

The other types of federal budget revenues from the use of state property in the form of tangible assets (rental payments for land and property, transfer of profits from unitary enterprises) are of a complementary nature.

When considering property relationships from the point of view of expenditure, it should be noted that after a number of adjustments, these issues were attributed to the government program (GP) “Management of Public Finances and Regulation of Financial Markets” supervised by the RF Ministry of Finance, which also includes the direction (subprogram) “Federal Property Management”.

The financing for the GP, which has been implemented since the beginning of 2022 in its new version, is presented in the new draft federal budget in the context of other federal and departmental projects, as well as complexes of process-related measures (CPM). One of the most recent of these is the CPM “Federal Property Management”, whereby the budget allocations in the draft law will amount to Rb4,868.6 mn in 2023, Rb4,756.7 mn in 2024, and Rb4,868.6 mn in 2025 – the same as in 2023.

The year-on-year pattern of budget allocations to the implementation of that CPM shows that the significant reduction (by more than 8%) in its costs in 2023 on the current year will continue through 2024, although to a lesser degree (by 2.3%), with a return in 2025 to the level ​​of next year.

Compared to the other CPMs, “Federal Property Management” in terms of annual funding is superior to “Maintenance of Information Systems for Ensuring Budgetary Legal Relations”, “Implementation of State Functions to Control the Production and Turnover of Ethyl Alcohol, Alcoholic and Alcohol-containing Products, to Supervise and Provide Services in That Sector”, “Organization of the Formation of the State Fund of Precious Metals and Precious Stones of the Russian Federation”, “Improving the Efficiency of the Federal Assay Chamber in Exercising State Control (Supervision) of the Production, Use and Circulation of Precious Metals, the Use and Circulation of Precious Stones”.

In this connection, it should be noted that the list of departmental projects (DP) also includes the DP “The State as an Effective Owner”. However, the draft federal budget for 2023-2025 does not provide for its financing, earmarking all the relevant funds for the measures to be implemented within the framework of the CPM “Federal Property Management”.

Georgy Malginov – Candidate of Economic Sciences, Head of the Ownership and Corporate Governance Department