On the Current Federal Budget

Publication by the Federal Treasury on Wednesday, March 26, of the monthly report on execution of the federal budget in January revealed for a short period of time secrecy over federal law No. 349-FZ on The Federal Budget in 2014 and the 2015 Planned Period approved on December 2, 2013. Without the data provided in the report on complete allocations by sections and subsections of the functional classification of expenditures it is impossible to evaluate correctly the federal budget expenditures envisaged by the above law for 2014.

The analysis of the Treasury's report showed that in the final budget version the expenditures as regards the section – the National Defense – were determined in the amount of Rb 2,488,134 trillion (3.4% of GDP or 18.3% more than it was actually spent in 2013), that is, a week after signing of the November conclusion by the Committee of the Council of Federation on Defense and Security they decreased by over Rb 1bn, while their closed portion related to the state defense order (SDO), by over Rb 13bn. With taking into account expenditures in other sections of the federal budget related to support of the defense and industrial complex (DIC), pensions of the Ministry of Defense and other (by experience of 2013 they total about 0.9% of GDP), as well as Rb 553bn worth of state guarantees to DIC entities (0.8% of GDP), the military burden on the Russian economy in 2014 may exceed 5% of GDP, thus surpassing the relevant "achievement" of the US (4.4% of GDP).

There are the following main questions which have remained open in the past few years: 1) will the Russian defense and industrial complex manage to fulfill the rapidly growing SDO and 2) will in such a situation prices on arms and military equipment increase? The answers to those questions are known to everybody, which fact is confirmed by a Rb 13bn reduction of the closed portion of defense expenditures at the last moment before approval of the law on budget and the statistical data of DIC for 2013, or a lack of it just to be more precise.

The extent of the closed federal budget expenditures increased by 2.8 p.p. as compared to the previous year (to 16.7%), that is, every sixth rouble spent out of the Russian federal budget is either a secret or top secret one. The total amounts to Rb 2,325,810 with SDO and special services accounting for about two-thirds of the above amount and the rest of the sum, respectively. Long-term quantitative growth in the closed portion of expenditures resulted in a new quality: a closed portion of expenditures emerged in Section 0600 – Protection of the Environment – (Rb 58m) and Subsections 0106 – Ensuring of Activities of Financial, Tax and Customs Authorities and Supervising Financial and Budget Authorities – (Rb 36m), Subsection 0304 – Law Enforcement Agencies – (Rb 5m), Subsection 0308 – Drug and Psychotropic Substance Control Authorities – (Rb 19m) and Subsection 1004 – Protection of Family and Childhood (Rb 0.6m) where it never existed before and returned after a long period in Subsection 0108 – International Relations and International Cooperation – (Rb 10m) and Subsection 0704 – Secondary Vocational Training – (Rb 3m).

Dynamics of the closed portion of federal budget expenditures in the 2005-2014 period is shown in the table.

Vassily Zatsepin, PhD (Military Science), Head of the Economics of the Military-Industrial Sector Department

[1] Inapplicable due to a change in the structure of budget classification.