Results of Execution of the Federal Budget in 2013

On the first day of the Gaidar Forum, Anton Siluanov, Minister of Finance took the floor at the panel discussion. In particular, he touched upon the results of execution of the federal budget in 2013.


According to Anton Siluanov's estimate, the results are not bad in general – the total deficit is at the level of 0.5% of GDP with the planned level of 0.8% of GDP. It is to be noted that the money of the Reserve Fund was not only used, but it is planned to transfer about Rb 200bn into it. However, in his address Anton Siluanov gave some figures which in his opinion point to existing problems and warn against the excessive optimism. In 2013, the non-oil and gas deficit amounted to 10.2% which is more than the planned 9.7% of GDP. According to Anton Siluanov, in conditions which prevailed in 2013 "it would have been necessary to replenish the Reserve Fund by nearly Rb 1 trillion, rather than Rb 200bn".


So, how "healthy" is the federal budget today (if the topic of another panel discussion which took place an hour later after Anton Siluanov's speech is rephrased)? One can get some idea from the following table.



In general, evaluation of the volume of the tax revenues of the federal budget in 2013 permits to forecast a virtually complete fulfillment of the plan on general collection of taxes transferred to the federal budget. However, if in 2012 the plan on revenues was exceeded by 5.7% at the expense of the severance tax and customs duties, in 2013 the above types of tax revenues ensured only fulfillment of the general plan (or an insignificant excess thereof) with an apparent shortfall of 20%, 13.5% and 8.6% as regards the profit tax, VAT and excise revenues, respectively.


As a result, a shortfall of the non-oil and gas revenues was compensated at the expense of the severance tax and customs duties. As a result, though prices on Urals oil in 2013 were somewhat lower than in 2012 ($107.8 a barrel for ten months of 2013 and $111 a barrel for the same period of 2012) it is planned to transfer only Rb 200bn to the Reserve Fund while on the basis of the results of 2012 Rb 1,090bn was transferred. It is to be noted that in 2013 the non-oil and gas deficit of the federal budget increased.


What do those ratios point to? They point to the fact that dependence of federal budget revenues on the revenues of the oil and gas industry does not become smaller (mid-term budget plans envisage gradual decrease in the share of oil and gas revenues in the total sum of revenues of the federal budget), but, on the contrary, increases. So, budget risks are getting higher. What will happen if global oil prices fall dramatically? In that case, all the tax revenues paid to the federal budget, as well as regional budgets will decrease.


In 2013, a shortfall of VAT revenues is of a particular concern; it is to be noted that VAT revenues were rather stable during the 2009 crisis. As a result, a drop in federal budget revenues in case of macroeconomic shocks may become more far reaching than in 2009. It is to be noted that expenditure obligations of the federal budget have only increased since that time: 18.2% of GDP in the pre-crisis 2008 against 20.6% on the result of 2012 (the data is not yet available for 2013, but the figure will most probably be higher taking into account the slowdown of GDP growth rates).


As a result, despite the fact that the federal budget was executed in 2013 with a smaller general deficit than it was planned the risks for the federal budget and the budget system in general are getting higher. As soon as a patient runs temperature, but does not cough, urgent hospitalization is not needed. However, "health" problems of the federal budget (though not so evident at present) build up. The most important thing is to make urgently correct conclusions and select proper methods of treatment not only within the frameworks of the budget policy, but also the social and economic policy as a whole because the budget in the final analysis is an instrument and not a goal in itself.


А.А. Mamedov, Senior Researcher of the Budget Federalism Department


1 There is preliminary information on execution of the federal budget for 11 months. The main reporting of the Federal Treasury is available only for 10 months of 2013