On the publication of the 2011 Federal budget

On 24 December, Rossiiskaia gazeta [The Russian Newspaper] completed its official publication of Federal Law of 13 December 2010, No 357-FZ, "On the Federal Budget for 2011 and the 2012 and 2013 Planning Period", begun a week earlier.

The share of classified (secret and top-secret) allocations in the 2011 budget reached its historic high of 12.25% (which amounts to 1 trillion 306 bn Rb). It should be reminded that the full and detailed information on the allocations to all the items and sub items of the functional classification of federal budget expenditure has not been published as part of federal laws on the budget since 2008, although it is made openly available as attachments to the relevant draft laws. In this sense, the new Federal Law No 357-FZ was no exception.

As result, the federal budget cannot be  understood even by an eminent economist (let alone a layman), as can be seen from Yevsey Gurvuch’s comment published on 17 December in Rossiiskaia gazeta. Even if one overlooks the accidental mistake of applying as an index in his diagram a percentage of GDP instead of a percentage of budget expenditure, it will turn out that (judging by the same diagram published in the newspaper) all the commentator’s estimates and conclusions are based on the government’s draft of the federal budget, and not on its final version in the form of Federal Law No 357-FZ, which was signed by President of the Russian Federation Dmitry Medvedev on 13 December.

Is there any difference between the two versions? Indeed, there is a difference, because in the two-and-a-half months during which the draft budget was being considered by the Federal Assembly, the amounts to be allocated to certain items and sub items were changes to the tune of tens of millions of rubles ions – which is not surprising. However, we are going to learn about this only a few months later, when the draft of the next version of the federal law is put forth, – from the explanatory note of the RF Ministry of Finance attached to it.

In his speech delivered in late November at the Gorokhovets Artillery Range, D. Medvedev declared that the amount of funding allocated to national defense will remain at the level of 2.8 % of GDP over the period from this year through 2020 (while the amount of this expenditure item since last year (2009) had already effectively exceeded 3% of GDP. And the amount of allocations under the Section “National Defense” planned for the next year in accordance with  Resolution of the Committee for Defense and Security of the Federation Council, of 30 November 2010, No 3.5-07/1681, equals 14.3% of federal budget expenditure, or 3.02% of GDP, or 1 trillion 524 bn Rb. In this connection it is noteworthy that the expenditures under the “National Defense” item have increased by 20% (!) against the background of a budget deficit and uncontrolled inflation (the aforesaid allocations are not published in full in Law No 357-FZ, and so their size can be estimated only with the help of information from another source). 

Deputy Minister of Finance Anton Siluanov as early as 3 June 2010 declared that his department is fully prepared to further increase Russia’s military expenditure (at the expense of taxpayers): “In 2010, the volume of defense expenditures was 2.6 per cent of the federal budget. In the subsequent years, these expenditures are going to grow. In 2011 they will amount to 2,9 per cent, in 2012 – to 3, and in 2013 –  to 3.2 per cent”. However, as early as 2010 it was planned that more than 2.8 % of GDP will be spent from the federal budget under the Section “National Defense”. It could have been said that the difference of 0.1 – 0.2 p.p. of GDP is not really so huge, but Minister of Finance Aleksey Kudrin, after the President’s Message to the Federal Assembly delivered on 30 November announced that, as far as he himself was concerned, the intention to allocate 20 trillion Rb to that was “a new task”. And as early as 21 December another Deputy Minister of Finance, Sergey Shatalov, admitted that the budget drawn for 2011–2013 does not take into considerations many of the expenditures that “have already been announced – and first of all these are the defense expenditures”. If we have indeed understood correctly Shatalov’s words, the recently signed budget law needs already to be revised.

And this is only a natural outcome of the situation when the federal budget is sold to us like a pig in poke, while the budgetary process in this country is increasingly resembling a secret operation launched by the special services.

V. B. Zatsepin – Senior Research Fellow, Military Economics Department