News
18.08.2009
Budget deficit ceiling to be raised to 7.5%
On 14 August Prime Minister Vladimir Putin met in Sochi with State Duma Speaker Boris Gryzlov, Federation Council Speaker Sergei Mironov, and Deputy Prime Minister and Finance Minister Alexei Kudrin.
Vladimir Putin said: "The first consultations on drafting the 2010 budget and setting targets for 2011-2012 opened on July 27. We have held such consultations regularly for several years as they have proved their effect.
I want the Speakers of both parliament houses to join them the present consultations from the start. It will be a hard job with financial problems galore in the world and national economy. We have discussed them many times before.
Though we are cutting expenditures, we have agreed to retain our basic social goals and meet all previously set targets.
We have analysed work on the national projects today, and formulated relevant goals-which means we have to retain the preset rate of funding at this year's level, and even increase it slightly, crisis or no crisis. Regrettably, we will clash with problems bred by deficit, which demand the utmost responsibility lest we upset national macroeconomic stability.
We must create every condition for overcoming the crisis, and set up a reliable basis for further economic development. That is what we should proceed from in final decision-making.
We have to renounce all minor goals of this and next year.
No other country in the world would increase welfare grants during a crisis, let alone launch an ambitious pension reform. However, we set these goals fairly long ago, and we intend now to implement all previous plans despite all hardships.
These programmes necessitate reduction of other budget expenditures, which also belong to top national priorities-economic diversification, innovation, defence and security.
We are facing a hard and extremely responsible job. It demands the utmost efficiency and close contacts between the Government, the State Duma and the Federation Council."
Alexei Kudrin: "On July 27, we opened consultations with an ad hoc team established by the United Russia party. It represents the Just Russia party and the budget committees of both parliament houses as the principal bodies usually taking part in discussions on all relevant matters. We will later meet with all parliamentary groups and learn their opinions.
We have taken stock of issues posed by the parliament even during the first meeting. A meeting was held at the Agriculture Ministry, Minister Yelena Skrynnik chairing. Health and Social Development Minister Tatyana Golikova chaired a meeting on social development at her ministry. I chaired several meetings on fiscal relations within the country and on road construction, with an emphasis on target allocations to regions. Federal Road Agency head Anatoly Chabunin attended.
Yesterday, we made a mini-summary of those meetings, and specified the agenda with an emphasis on questions in need of verification and updating, or implying budgetary amendments to submit to the State Duma even while the Government is considering the draft budget. The number of items we have worked on is too small to speak about any visible differences. We have not taken stock of the whole agenda yet-first of all, the amount and distribution of federal allocations to regions for regional highway construction. All previous budgets envisaged such allocations.
Even though such construction belongs to regions' own duties.
More than that, even before the crisis we intended to change those principles next year, due to a programme to be launched in 2010. It envisages modernising the entire Russian transport system, with certain changes of funding patterns-in particular, greater discrimination in financing the construction of cloverleaves connecting regional and federal highways. The programme also envisages aid to regions in building bridges and heaviest-loaded road stretches, and in road maintenance in large cities, with their heavy traffic. We have also discussed the amount of federal highway maintenance. Major improvements are necessary as some federal highways are in a bad state.
The programme envisages road building and maintenance outlays skyrocketing eventually-more than we can afford during the crisis. We have not buried the issue, however, and intend to come back to it later.
There are two key issues in agriculture-grain purchasing interventions and mineral fertiliser acquisition. The Government has cut relevant allocations.
We intend also to reconsider aid to drought-stricken areas even within this year. Mr Putin, we are working on your instructions, which often coincide with requests from members of parliament.
Many Russian regions are increasing property tax rates. It is an inevitable step. Regions have the right of increasing their revenue-in particular, through market evaluation of taxable property and taking stricter stock of it.
This concerns federal agencies, too. We should earmark sufficient allocations to them-or they will not afford full tax payments.
There are disputable issues in regions' fiscal relations with the federal centre, the amount of transfers, and methods of assessing taxable capacity, which is evaluated proceeding from the previous three years. The crisis has changed this capacity dramatically, so past three years do not reflect what we will have next two years. We are willing to make necessary corrections, and will discuss relevant proposals within a few weeks.
We have agreed for the Ministries of Agriculture, Social Development, Finance and Transport to cooperate on those issues. As for road construction, an ad hoc team will be established to represent interested parliamentary groups, and relevant committees of the State Duma and the Federation Council.
We have put September 3 as the deadline to be ready with initiatives on the entire list of problems I have mentioned (the same concerns the ad hoc team) because a subcommission of the Government Budget Commission will start work on September 3 to reconsider the problems according to the procedure, and summarise proposals advanced by that day.
So, I think, we will come to consensus the closest possible before we submit our proposals to the Government and the State Duma to make an account of public concerns which reach members of parliament in their constituencies, and which they voice.
As for the organisation of Government teamwork with the Federal Assembly-the State Duma and the Federation Council-at next year's budget we have an ad hoc team. Oleg Morozov, my first deputy, heads it on the Duma's behalf. The team met twice, the latest on August 7, and discussed the agenda in sufficient detail. We advanced new ideas-in particular, on crediting regions, and on highway construction and maintenance. We proposed to prolong credit terms from three to five years because longer terms make expenditures more effective. The idea is under discussion now.
As for agriculture, the United Russia has done enough to promote it. A law and a national programme in support of farming have been adopted. We want the basic programme indices to repeat in the 2010 budget at the government level.
The draft budget must be submitted to the State Duma no later than October 1. We have drawn a schedule for all stages of its adoption. We will certainly meet the deadline and pass the Budget Law to the Federation Council in time after the State Duma discusses and passes it."
Vladimir Putin: As you know, we intended initially to keep next year's budget deficit below 5-5.5%. However, there are low-income population groups who need support-pensioners, disabled persons, etc. Then, there are pledges to some economic sectors-in particular, the government-financed ones, on which we must be good. There are also pivotal national priorities-defence, security, the innovation economy, which also need support. So we deem it necessary to raise the budget deficit ceiling to 7.5%.
However, we should lower that ceiling in 2011-2012. We must be sparing of our reserves and meet our targets if we want to be responsible in our social and economic policy.
The world market prices of traditional Russian exports are not sliding down. On the contrary, they are rising, somewhat. We see certain positive trends in the world and European economy, and we expect them to have a beneficial effect on Russia. But we should not be overly optimistic. We need realistic and circumspect plans. Please don't forget it when you draft the budget.
7.5% is the highest permissible deficit. If the Government, the Finance Ministry or any other agency, or State Duma or Federation Council think priorities should be shifted to the budget draft offered by the Government, it should be done not by bloating the deficit but through redistributed expenditures. Priority setting is an essential part of our teamwork."
SKRIN
