The intention of the Ministry of Finance to cut budget expenses encourages optimism

The Ministry of Finance of the RF proposes to reduce federal budget expenses by 5% in almost all areas.

According to Minister A. Siluanov, the Ministry of Finance plans to "... cut expenses by 5% for all, without exception, ministries and departments. This unified approach will allow to raise a pool of funds to be further referred to priority areas which will be determined by the government in the nearest future".

This statement encourages some optimism because at the present stage when the economy has reached the potential of its development and, according to some experts, an economic stagnation takes place, short-term growth stimulating measures expressed in increasing state expenditure (including non-productive items, such as state service expenses) will only lead to negative consequences.

At the same time, it should be noted that just reduction of expenses obviously will not be sufficient for stimulation of the economy. It is important that not only should expenses which have a counterproductive effect on growth be reduced but their effectiveness should be increased in order to increase volume and improve quality of production factors which in a long run will lead to high and steady economy growth rates1. At the same time, the increase of effectiveness of state expenses does not appear to be possible without improvement of institutes, which, in our opinion, should become one of the top-priority tasks of the government in the nearest future.

M.V. Kazakova, Candidate of Economic Sciences, Head of the Economic Development Department


1 See and