GEORGY MALGINOV: “INCOMES FROM PRIVATIZATION AND MANAGEMENT OF STATE PROPERTY IN THE DRAFT FEDERAL BUDGET FOR 2021-2023”

At the same time, the draft of the corresponding federal law, like a similar document a year ago, does not contain information on the specific amount of incomes resulted from privatization, either in the principal part or in the appendices. Only the explanatory note to the document indicates the funds coming from the privatization of federal property along with state borrowings as an independent source of financing the federal budget deficit.

The forecast for revenues to the federal budget coming from privatization of federal property is estimated at Rb3.6 billion in 2021 with Rb3.6 billion in 2022 and Rb3.3 billion in 2023. Their role in financing the federal budget deficit will be minimal: in 2021-2023, the expected value of privatization revenues will be less than 0.5% of those funds suggested for soliciting through government borrowing. The amount of revenues forecasted for 2021-2022, coincides with the forecast for funds coming from sale of federal property included in the materials to the draft law of the federal budget for 2020 and the planning period 2021-2022 introduced by the Russian government last fall and with the amount declared in the current forecast plan (program) of privatization (approved by the Resolution of RF Government dated December 31, 2019 No. 3260-r).

The feasibility of such a forecast of privatization incomes can be assessed by comparing it with the intermediate results of the privatization program implementation in the current year. According to the operational Report on the execution of the federal budget as of October 1, 2020 (based on sources of internal gap financing), presented on the website of the Federal Treasury, the funds from sale of shares and other forms of participation in the capital held by federal property, amounted to Rb7.585.4 million, exceeding more than double the annual amount of receipts in addition to the largest transactions contained in the current privatization program (Rb3.6 billion).

Thus, the presented data generally prove the feasibility of budget forecasting, though there is no total confidence beyond coming 2021.

Federal budget revenues resulted from the use of state-owned property are forecasted equaling to Rb704.7 billion for the coming year, which is Rb279.4 billion (or 28.4%) less than the estimate for 2020.

Throughout the period 2021-2023, dividends will be the main source of such incomes (over 60-70%). It is forecasted for 2021 that federal budget revenues in the form of profits attributable to shares in the authorized (reserve) capital of economic partnerships and companies or dividends on shares owned by the Russian Federation, will amount to nearly Rb442 billion, which is approximately 31 % less than the updated estimate for 2020 (Rb639.5 billion including dividends from PSC “Sberbank”), mainly due to a reduction in the size of the companies' net profit, while the factor of changes in the dividend payout ratio should somewhat dampen it.

The alternative, progressive dynamics of the amount of dividend payments to the budget is predicted for the next 2 years. Growth of the companies’ net profit should provide for the increase of dividends largely in 2022 and fully in 2023. As a result, their increase by more than 1.7 and 1.2 times respectively is expected in 2022-2023 respectively. Taking into account the dynamics of dividend receipts in recent years (an increase by 24.4% (up to Rb312.6 billion) in 2018 and by 41.3% (up to Rb441.6 billion) in 2019), it looks problematic to reach a value of Rb754.3 billion in 2022 exceeding the estimate for 2020 (Rb639.5 billion).

The values for 2021-2023 listed above, include dividends on Sberbank equity stock sold by the Bank of

Russia in accordance with the Federal law dated 18.03.2020 № 50-FZ to the advantage of the Russian Federation represented by RF Ministry of Finance. Earlier, revenues from participation in the capital of PSC “Sberbank of Russia” were accounted in other non-tax budget incomes and subject to transfer based on special laws and reduced by this amount of a part of the CB RF aggregate profit sent to the federal budget. Herewith, the federal budget revenues from other gratuitous receipts accounted only for 2021 take into account the “one-time” transfer of a part of the income received from the sale of common shares of PSC “Sberbank” by the Central Bank (Rub 200 billion). This amount should be considered in the context of the completion of transaction with Sberbank shares, since the assessment of the main part of such receipts in the current 2020 is many times larger and amounts to more than Rub 1.066 billion.

However, other federal budget revenues resulted from use of state property related to tangible assets (land and property rent payments, transfer of profits of the unitary enterprises) are secondary.

When we consider the block of property relations from the point of view of expenses, it should be noted that the state program (SP) "Federal Property Management", which has been in effect since 2013, changed its format in the spring of this year. A subprogram with a similar name was included in the SP "Economic Development and Innovative Economy” by Decree of the Government of the Russian Federation No. 376 dated March 31, 2020, This subprogram is designed for 5 years (until the end of 2024). The planned amount of federal budgetary appropriations for the entire implementation period constitutes about Rb21.2 billion. It is divided into comparable annual financing amounting to Rb4.152.3 million in 2020 compared to nearly Rb4282.5 million in 2023-2024 (Rb4204.8 million in 2021 and Rb4272.9 million in 2022).

The amount of funding envisaged by the draft of the new federal budget differs downward from the above-mentioned ones: thus, by 4.5% (Rb4015.7 million) in 2021, by almost 7% (Rb3978.5 million) in 2022, by 5.5% (Rb4046.5 million) in 2023. The impact of budgetary challenges is obvious due to the economic crisis. A sizable (more than 18%) reduction in costs for the implementation of the Federal Property Management subprogram in 2021 compared to the level expected this year should be replaced by their actual stabilization in 2022 and an increase by 1.7% in 2023. Such fluctuations coincide with the trajectory of total spending on the implementation of the “Economic Development and Innovative Economy” program, that however, envisage a much larger amplitude of decline and growth in 2021-2023.

Among all subprograms that compile this SP, the “Federal Property Management” (about Rb4 billion), is roughly comparable to the subprogram “Development of antimonopoly and tariff regulation, competition and increasing efficiency of antimonopoly control” (about Rb3 billion) in terms of the expected annual funding, yielding to most other subprograms: "Development of small and medium-sized businesses", "State registration of rights, national inventory and cartography" "Stimulating innovation", "Official statistics", "Investment climate", "Tourism", "Establishment and development of the “Skolkovo” innovation center.

In terms of yearly funding, the “Federal Property Management” outperforms also the following subprograms in addition to the antimonopoly subprogram: “Administrative Personnel”, “Improvement of the Public Administration System”, “Improvement of the State Strategic Management System”, “Energy Saving and Improvement of Energy Efficiency.”

Georgy N. Malginov, Candidate of economic sciences, Head of Ownership and Corporate Governance Department at the Gaidar Institute.