Russia to bring budget deficit down to zero

Russia to bring budget deficit down to zero

Russia's Finance Ministry expects that the budget deficit will be 2% this year, the head of the ministry Anton Siluanov said on the sidelines of the annual autumn meeting of the World Bank and the International Monetary Fund.

"We expect that optimizing spending and improving revenue collection will reduce the federal budget deficit to 2% of GDP in 2017 against the original target of 3.2%," TASS cited him as saying.

According to the minister, a budget with zero deficit in Russia is possible in 2019. "In the medium term, we will seek additional fiscal consolidation to eliminate the primary deficit of the federal budget by 2019," Siluanov said.

A professor of the RANEPA Chair of Economics and Finance of the Public Sector, Lyudmila Pronina, speaking to Vestnik Kavkaza, noted that the Ministry of Finance managed to achieve such budget cuts mostly by cutting costs. "Unfortunately, there is optimization due to the reduction of expenditures on social items in education, health care, etc. In addition, the project for spending on the national economy is only 14.7% of GDP, which is a very small figure considering all of its problems, even considering the growth of state investments in the economy at the level of 4%," she said.

"The situation in the agrarian sector is rather complicated: the state program for the development of agriculture seems to increase slightly, but the expenditures on investment loans in agriculture are quite small - about 58 billion rubles in each direction. This is not enough," Ludmila Pronina stressed.

Also, the federal center has significantly optimized the provision of financial assistance to the regions. "Since January 1, the Ministry of Finance has introduced very serious restrictions: grants for equalizing the budgetary provision are not more than 20% and only if the debt is repaid. So the budget can save a significant amount of money," the economist said.

"In connection with the FIFA World Cup next year, the Ministry of Finance will not introduce serious tax changes. But the price for gasoline and diesel fuel will increase by up to 15%, which will affect the price of all goods and services," Ludmila Pronina concluded.

At the same time, it will be possible to bring the budget deficit down to zero precisely by increasing the collection of tax revenues. "I doubt that they will bring budget deficit down to zero in 2019 - it will still fluctuate about 2%. Everything will depend on the taxes. And Anton Siluanov wants to achieve it through tax changes," the professor of the RANEPA Chair of Economics and Finance of the Public Sector said.

The vice-rector of the Academy of Labour and Social Relations Alexander Safonov also drew attention to the fact that it was possible to achieve a reduction in federal spending primarily due to savings on a number of articles.

"First, saving on indexation of pensions of working pensioners. Second, cuts in other government programs. So, there is no wage-indexing for public-sector workers. Specific areas have been sequestered as part of social spending," the expert noted.

According to him, many spending obligations were transferred from the federal budget to the regional level. "In addition, higher salaries for public-sector workers are achieved with the help of optimizing the number of workers," the vice-rector of the Academy of Labour and Social Relations added.

The expert drew attention to the fact that in parallel with lower requirements, there is revenue growth due to the growth of the tax base, for example, after the introduction of paid parking in Moscow. "There work to increase the collection of incomes is also underway. Banks now block accounts of some small businesses and entrepreneurs if they do not make enough deductions for wages, taxes, and so on," the analyst said.

In the long term, he said, additional budget consolidation can be achieved primarily through cost optimization. "This means, for example, the redistribution of money from rich regions to the poor ones. The possibility of deductions from income tax of 1% in favor of poor regions was also discussed. There is also another way - to collect more state dividends from state corporations, as well as cuts in science, education and healthcare," Alexander Safonov concluded.