On the Federal Budget for 2012–2014

At its meeting on 21 September 2011, the Government of the Russian Federation considered a draft of the Federal Law "On the Federal Budget for the Year 2012 and the 2013–2014 Planning Period".

What is immediately noteworthy is that in comparison with the main parameters of the initially approved Law on the 2011-2013 Federal Budget, estimates of budget revenue for 2012 and 2013 have increased, on average, by 3 pp of GDP. In many respects these upbeat estimates have resulted from the more optimistic forecasts for Urals prices and by the accelerated indexation of excise tax rates for tobacco and alcohol products. The share of customs duties, VAT and Mineral Extraction Tax in the volume of revenue forecasted for the next three years has been further increased – to approximately 85 % of total revenue.

By comparison with last year’s estimates, federal budget expenditure will increase by just 1.5 pp of GDP, thus somewhat moderating the parameters of budget deficit (within the limits of 1.5 % of GDP). It is planned that in 2012-2014 there will be an increase in spending on defense, national security and law enforcement. This rise in expenditures will be caused by the implementation of the reform of money allowance for military servicemen and law enforcement personnel, and by a switch-over to federal funding of the police from 1 January 2012. The announced growth in allocations under the ‘national security’ category of expenditure items will be compensated for by a reduction in the volumes of financial support provided to the national economy (resulting from a cut in subsidies to some of its sectors and the completion of a number of federal target programs and capital construction projects), and also by a partial switch-over of the public education system and the public health care system to funding from other tiers of the budgetary system.

Despite the achieved improvement in the federal budget balance, the size of the non-oil and gas deficit is still alarming: by the year 2014 it is expected to decrease by only one quarter of its 2010 value (that is, from 12.5 % of GDP to 9.2 % of GDP). At the same time, according to RF Minister of Finance Aleksey Kudrin’s estimates, the value of the afore-said deficit that can be deemed to be acceptable from the point of view of the stability of the budget system should be around 5 to 6 % of GDP (as it was in 2008).

I. A. Sokolov, Candidate of Economics, Head of the Budget Policy Department