No budget deficit in Russia

No budget deficit in Russia

Russia's State Duma has passed amendments to the law on 2018 federal budget and the planned period of 2019-2020 today.

On June 7, the State Duma passed amendments to the law on 2018 federal budget and the planned period of 2019-2020 submitted by the government in the first reading. 

Amendments envision an increase in budget revenues by 1.815 trillion rubles ($29.3 bln) in 2018, particularly through a surge in oil and gas revenues of 1.76 trillion rubles ($28.3 bln) and a rise in non-oil and gas revenues amounting to 59.8 bln rubles ($964 mln). Revenues will increase by 1.7 percentage points to 17.4% of GDP.

Budget expenditures will go up by 61.9 bln rubles ($998 mln) in 2018 to 16.6 trillion rubles ($267.8 bln), or 16.9% of GDP. 

Thus, deficit of federal budget will turn into surplus this year amounting to 481.8 bln rubles ($7.7 bln), or 0.5% of GDP, TASS reported.

A professor of the RANEPA Chair of Economics and Finance of the Public Sector, Lyudmila Pronina, speaking to a correspondent of Vestnik Kavkaza, noted that reaching a budget surplus is only the first step towards fulfilling the tasks set in Vladimir Putin's new May decrees. "This surplus is not enough, the government needs to find additional 8 trillion rubles to execute the programs set in the May decrees. It will be also achieved due to raising the retirement age, which will bring 2 trillion rubles for 6 years, increasing the VAT to 20%, reducing benefits, as well as imposing duties on imported goods purchased through the Internet," she pointed out.

"The amendments adopted today include, first and foremost, the adjustment of state programs. The small increase in spending on education, health care, and those programs that are taken into account in the new May decrees. There is no fundamental change, since the surplus is small. The most significant amendments, perhaps, will be made this autumn," Ludmila Pronina said.

The vice-rector of the Academy of Labour and Social Relations Alexander Safonov, speaking to a correspondent of Vestnik Kavkaza earlier, noted that budget surplus was achieved primarily due to high oil prices. "The level of oil prices soared to $80 per barrel yesterday, which is very high. Earlier the price fell to $30 per barrel. Thus, the amount of income in dollars sent to the treasury over these years has grown up 2,3 times, The second factor that positively influenced the formation of the budget surplus is the change in the ruble-dollar exchange rate, since the ruble exchange rate has decreased, the revenues in rubles received by the government from taxes and oil, fuel and energy products excise-duties sharply increased. Another point is the reduction of budget expenditures. Defense expenditures and social expenditures to a certain extent were reduced. It helped to balance the federal budget in terms of surplus," the expert said, adding that we already had surplus in the first quarter of this year.

"One of the main tasks that the government faces is to overcome poverty. Therefore, funds will be directed to continue the policy of keeping public sector wages at those indicators that were reached in March. And this is rather large expenditures, of more than 1 trillion rubles. Second, there has been an indexation of benefits, there will be additional benefits for the maintenance of a third child. There is also a task to ensure the incomes of working families at least below the subsistence minimum for each family member," the vice-rector of the Academy of Labour and Social Relations said.

"In 2019-2020, we should see the growth in construction costs. In 2018, the real incomes of the population may grow by 5%, which is quite good," the expert explained.

At the same time, he drew attention to the fact that certain categories of citizens will continue to face certain difficulties. "In 2018 and 2019, the income on deposits will continue to decline. Investment income of the population will fall slightly. But in general, 2019 and 2020, probably, will be positive in terms of income for us. I mean the increase in salaries in the fuel and energy complex, metallurgy, in the construction sector. And in 2020, most likely, we will see a restart of incomes in small business, which serves the production of services to the people," Alexander Safonov believes.