The Laws on the RF Federal Budget Are Officially Published

The texts of two federal laws recently signed by the RF President, Federal Law No 349-FZ ‘On the Federal Budget for 2014 and the Planning Period 2015 and 2016’, and Federal Law No 348-FZ ‘On the Introduction of Amendments to the Federal Law ‘On the Federal Budget for 2013 and the Planning Period 2014 and 2015’ were posted to the RF Ministry of Finance’s website (on 4 and 9 December respectively). Besides, the textual part of the first Law (without the appendiced tables) was published on 6 December in Rossiiskaia gazeta [The Russian Gazette].

The federal budget for the next three years underwent some changes during its two-month long creeping through parliament as a draft law, although the basic indicators like revenue, expenditure, government debt cap and benchmark macroeconomic projections remained unaltered. No doubt, the most noticeable alteration is the shrinkage in the length of Russia’s major financial document’s physical size: it has lost 145 pages, now numbering only 6,404 pages (nevertheless, last year’s record length is now exceeded by 1.5 times (then, the federal budget’s text was only 4,251 pages long). However, in contrast to the situation observed last year, after the federal budget had been considered by the State Duma, its openness increased - however slightly: the classified budget expenditures for 2014 and 2015 were reduced by Rb 2,960m and 14,778m respectively; while at the same time, it should be admitted, the volume of classified budget expenditures for 2016 increased by Rb 844m. As a result, the total volume of classified expenditures over the next three years will amount to 16.7%, 21.2% and 24.8% respectively of total federal budget expenditure – thus, as it has been noted elsewhere, increasing by more than 10 p.p. on the current financial year.

As a result of the 2-month period of cooperation between the State Duma’s deputies and the government, in the course of which 70% of 212 amendments to the non-classified budget items were made, budget expenditure for 2014 was cut under categories 0100 Nationwide Issues and 0300 National Security and Law Enforcement – by Rb 21,267m and 18,157m respectively, specifically under the subitem Other Issues in each of the two categories. Expenditures under category 0200 National Defense increased by Rb 11,916m, thereby not reducing but, on the contrary, increasing the amount of expenditure allocated to subitem 0209 Other National Defense Issues. As since 2007 the complete by-item information on budget expenditure is unavailable to the Russian public, it cannot be confidently stated that the last amendment was made exclusively at the expense of the classified defense-related items. Within the functional structure of budget expenditure, the leader in growth has become category 0600 Environment Protection, augmented by subsidies in the amount of Rb 25,216m, earmarked for domestic automobile producers as a compensation for the payment of the recycling fee.

Next year’s expenditure growth champion among government departments, naturally, is the Federal Agency for Scientific Organizations (created last October) with a budget of Rb 91,709m, which pooled the allocations previously intended for three state academies (the Russian Academy of Sciences with all its Departments; the Russian Academy of Medical Sciences; and the Russian Academy of Agricultural Sciences). The RF Ministry of Education and Science and the RF Ministry of Defense share 2nd place (expenditure growth by Rb 16,144m and 11,973m respectively), whilst 3rd place - formerly belonging to the Presidential Executive Office (expenditure growth by Rb 8,962m) – has been snatched, not without difficulty, by the Federal Road Agency, whose budget has been increased by Rb 10bn. To the newly created (in November 2013) RF Ministry of Construction, Housing and Utilities, a modest sum of Rb 120m was allocated for 2014. The most impressive losses after the parliament hearing have been suffered by the budgets of the RF Ministry for the Regions (cut by one-third, or Rb 26,469m) and Gosstroy [Federal Agency for Construction, Housing and Utilities] (cut by 9%, or Rb 9,687m).

However, a by-program analysis of the two-month-long budget adjustments produces quite a different picture of budget funding distribution. It becomes evident that the expenditure growth champion for 2014, strange as it may seem, has become State Program 19 ‘Forestry Development’ (increase by Rb 24,499m) and – more understandably - State Program 24 ‘Transport System Development’ (threefold growth by Rb 23,996m). The biggest cuts in the 2014 budget were made to State Program 33 ‘Regional Policy and Federative Relations’ (by 57%, or Rb 26,650m) and to State Program 34 ‘Socioeconomic Development of the Far East and the Baikal Region’ (by 43%, or Rb 19,962m). When this budget content is set against the general functional and by-department distribution of budget funds, one may well feel at a loss as to what this may mean; however, it should be remembered that the ‘program-oriented’ part of the federal budget for 2014–2016 is experimental in nature; so, later on, our ‘federal budget makers’ will have opportunities for arranging all three structures of the budget more logically, and so for preparing some coherent explanations for the public at large. 

In the text of the federal budget as amended by Federal Law No 348-FZ, the main projections have also remained unaltered, with the exception of revenue, which increased by Rb 40bn (with a corresponding reduction in the amount of deficit). Due to 66 amendments whereby some allocations were redistributed between budget categories and government departments (55 of these amendments having been put forth by the RF Government), the classified expenditure items have been cut by a total of Rb 492m – a change that carries on the trend that first emerged last year and may be regarded as an upshot of errors in the initial planning of the government defense order. As far as the non-classified items of the federal budget are concerned, the most substantial cuts have been made to category 0500 Housing and Utilities System (by Rb 20,043m) and category 0100 Nationwide Issues (by Rb 8,000,007m), while an additional sum of Rb 29,652m was allocated to category 0400 National Economy and earmarked for the Russian Agricultural Bank (Rossselkhozbank) and Russian State Agro-industrial Leasing Company (Rosagroleasing). Among government departments, the biggest ‘losses’ of budget funds were sustained by Gosstroy (Rb 20bn), the Federal Agency for the Management of the State Border (Rosgranitsa) (Rb 1,864m) and  the RF Ministry of Culture (Rb 1,255m).

And, although the expenditures of the RF Ministry of Defense and those under category 0200 National Defense determined for 2013 by Federal Law No 348-FZ are published, in accordance with the already mentioned recent tradition, only with regard to non-classified budget items, their full amount, nevertheless, was voiced by Russia’s President on 29 November (Rb 2,300bn), and by the Chairman of the RF Government on 6 December (Rb 2,100bn). Why this information is being concealed from the people by the authors of the law on federal budget – this question should be better presented to them; one thing is crystal clear, though – the principle of openness of the Russian federal budget is not being implemented in actual practice.
V.B. Zatsepin – Candidate of Military Sciences, Head of the Economics of the Military-Industrial Sector Department