The Current Budget is Aimed at Macroeconomic Stability

On October 19, 2012, at the plenary meeting of the State Duma the draft Federal Budget for 2013 and the 2014-2015 Planned Period was approved in the first reading. Deputies indorsed the country's main financial document provided that it was further updated by the second reading.


State Duma Deputies complain that the 2013 Budget is not the budget of development as it was before.  

For many years, the country’s main financial document was proudly called the Federal Budget of Development. In the past decade, dozens of institutions of development (about 30 projects and institutions) – free economic zones, an investment fund, VEB, Rosnano and Skolkovo – were established.

With interest in large-scale investments being great, the fact that such investments will be followed by a stage of high costs on maintenance of numerous projects is simply ignored. A single wrong large-scale decision taken at the federal level may in future turn into a heavy burden for regions.  It has been admitted for the first time that investment projects do not yield the expected outputs.  Moreover, they failed to live up to modest preliminary expectations.

The current budget will be aimed at ensuring a macroeconomic stability, rather than development; for that reason the budget is drawn with the minimum deficit which is to be zero by 2015. The budget includes no new large-scale political and financial projects, except for the former ones.

A budget rule preventing both squandering of budget funds and implementation of insensible projects was approved. From 2013, in planning of budget allocations expenditures will be more closely tied up to the expected revenues: “ultimate expenditures of the federal budget should not exceed the volume of revenues at a base price of more than 1% of GDP”. There is one more thing to be mentioned: the Reserve Fund can now be managed by a government decision and not through amendment of the law on budget; it is an important preventive measure in expectation of the crisis.

Speaking about preparedness to the crisis, it is to be noted that the budget was planned on the basis of oil prices of $97 a barrel and $101-$104 a barrel in 2013 and the 2014-2015 period, respectively.  With oil prices falling to $60 a barrel, about 3.5% of GDP will drop out.   

As regards the RF budget, a deficit of 3% to 4% creates an unprecedented situation. It is to be noted that the budget is currently drawn with a deficit of 0% to 2%.  

Most probably, in any case there will be no large-scale sequestering; it may happen if oil prices fall by 50%.   Normally, liabilities of investment nature are cut in the first place by way of putting off starting dates of investment projects. Wages and salaries will not fall victim to such cuts for sure as the government will not spare the Reserve Fund for that “good” purpose.  

I.А. Sokolov, PhD (Economics), Head of the Budget Policy Department