The draft federal budget for 2018 and the 2019-2020 planning period submitted to parliament by the Russian government stipulates that the revenues generated by federal property privatization should be treated as a separate source for covering federal budget deficit.
Meanwhile, the draft federal law itself, similarly to the draft law submitted a year ago, provides no details as to the specific amount of revenue to be received as a result of privatization either in its body text or in the annexes. It is only in the explanatory note attached to the document that the monies to be received as proceeds of federal property privatization are listed, alongside government borrowing, as a separate source to be used for covering federal budget deficit.
The federal budget revenues to be generated by federal property privatization are expected to amount to Rb 13.0bn in 2018, to Rb 12.2bn in 2019, and to Rb 11.4bn in 2020. Their role as a source to be employed in covering federal budget deficit will be minimal: in 2018, the planned volume of privatization-generated revenue is to be only 1.7% of the total amount of government borrowing, and in 2019 and 2020 – 1.5% and 1.1% respectively. The planned targets for 2018–2019 are below the forecasted amount of proceeds of sale of federal property entities less the value of shares in biggest companies as stated in the supplementary materials attached to the draft law on the federal budget for 2017 and the 2018–2019 planning period, submitted last autumn by the Russian government (Rb 13.6bn in 2018, and Rb 13.9bn in 2019).
This forecast of privatization-generated revenue can be viewed as sufficiently realistic, when set against the targets stipulated in the privatization program for 2017–2019 approved by Order of the RF Government No 227-r, dated 8 February 2017, and the preliminary results of its implementation published this year.
It should be reminded that the forecast plan (program) of federal property privatization for 2017–2019 sets the annual target of federal budget revenue, to be generated by federal property privatization less the value of shares in biggest companies, in the amount Rb 5.6bn, and according to data released as part of the monthly report on the execution of the consolidated budget of the Russian Federation as of 1 November 2017 (concerning the domestic sources of financing budget deficit), posted to the RF Federal Treasury's official website, the amount of proceeds of sale of shares and other forms of federal participation in capital is more than Rb 11.3bn. This is twice as much as forecasted in the privatization program, and significantly above the figures reported in the previous 3 years (Rb 8.0bn in 2014; Rb 7.3bn in 2015; Rb 9.5bn in 2016).
However, in the explanatory note, with a reference to Federal Law On the Federal Budget for 2017 and the 2018–2019 Planning Period No 415-FZ, dated 19 December 2016 (as amended in accordance with Federal Law No 157-FZ, dated 1 July 2017), the privatization revenue target for 2017 is higher (Rb 42.1bn). Meanwhile, no data concerning the amount of proceeds of sale of shares or other forms of federal participation in capital can be found in the available texts of the law, and this particular source for covering federal budget deficit is not listed separately, either.
As for the planned privatization deals involving 7 biggest companies, which were to be determined by special decisions of the RF President and the RF Government with due regard for the market situation, the recommendations of topmost investment consultants, and most appropriate timelines and privatization methods as stipulated in the current privatization program, given that the RF Government made no decisions concerning the alienation of any federal stakes in such companies over the period 2018–2020, no forecast is made concerning any such proceeds for 2018 and the 2019–2020 planning period on the basis of data released by the RF Federal Agency for State Property Management (Rosimushchestvo).
The forecasted target of federal budget revenues to be generated by the use of property entities in public ownership is Rb 584.1bn for 2018, which is by Rb 111.4bn (or 23.6%) more than the estimated figure for 2017. Throughout the entire period 2018–2020, dividends are to be the main source of such revenues (2/3 or more).
It is planned that in 2018, the amount of federal budget revenues to be received in the form of profits generated by stakes in charter (or share) capital of economic societies and joint-stock companies, or in the form of dividends on shares held by the Russian Federation, will be approximately Rb 380bn, which is 1.6 times above the estimated figure for 2017, because special decisions were made with regard to some biggest joint-stock companies (in particular, PJSC Gazprom, PJSC Transneft, PJSC Rosseti) whereby the year-end dividends for 2016 should amount to no less than 50% of their net profits.
In principle, such growth is possible. One example can be the year-end result of 2014 (Rb 220.2bn) relative to that of 2013 (Rb 134.8bn). However, that result was achieved in a situation where the amount of dividends to be paid by JSCs with state stakes was determined by their output in the pre-crisis year 2013. If we look at the results for two next years, the movement of dividends was uneven: growth by 18% in 2015 was followed by a plunge by 13% in 2016 (to Rb 226.6bn, less the proceeds of sale of shares in Rosneft entered in records as dividends paid by JSC Rosneftegaz).
All the other types of federal budget revenues generated by the use of property entities in the form of tangible assets (land and property lease, profits of unitary enterprises transferred to the federal budget) are only supplementary.
A separate note should be made of the possible transfer, in 2018, to the federal budget of the RF Central Bank's income for 2017 to be generated by its participation in the capital of PJSC Sberbank of Russia. In the explanatory note attached to the draft law it is stated that the forecasted revenue from this source in included in federal budget revenue in accordance with the provisions stipulated in the draft federal law 'On the Specific Features of the Transfer, in 2018, of the Year-end Revenues for 2017 Received by Central Bank of the Russian Federation Due to Its Participation in the Capital of the Public Joint-Stock Company Sberbank of Russia'. However, on the basis of the supplementary materials attached to the draft law on the federal budget, it can only be concluded that this issue will be settled by a separate federal law, for which no draft has been published so far.
The Government Program Federal Property Management approved by Decree of the RF Government No 327, dated 15 April 2014, was updated in spring 2017. Its period has been extended for one more year – throughout 2019, while the already evident trend towards cutting the amount of expenditure earmarked for its implementation will be continued. However, that document specifically addresses the planned, and not the actual, volume of budget funding, which is well illustrated by the draft law on the federal budget for 2018–2020. It envisages that the amount of budget allocation to this government program is to be somewhat increased relative to the amount stated in the program itself (by 0.3% in 2018, and by 2% in 2019). Moreover, in 2020 these are to be further increased by 1.4% relative to 2019, although the official end date of the program is stated to be 31 December 2019.
The bulk of the allocated funding is to be spent on the subprogram Management of Public Material Reserve. The subprogram Improvement of the Efficiency of Federal Property Management and Privatization, in terms of annual targets for 2017–2019, is to receive approximately 18% of the aggregate budget allocation. The planned increase in the volume of budget funding is to be distributed roughly evenly between the subprograms of the Government Program Federal Property Management.
Georgy Malginov – Candidate of Economic Sciences, Head of the Ownership and Corporate Governance Department