Russian budget deficit for 2016 increased to 3 trillion rubles

Russian budget deficit for 2016 increased to 3 trillion rubles

The Russian government has submitted draft amendments for the 2016 federal budget to the State Duma. 

According to the government website, the draft law proposes to adjust the main characteristics of the budget for the current year, taking into account expected assessment of the socio-economic development of Russia and budget implementation in 2016, TASS reports.

Thus, according to the draft document, budget deficit this year will increase by 674.2 billion rubles ($10.85 billion) to 3.034 trillion rubles ($48.84 billion) or 3.7% of GDP. Budget revenues will be reduced by 369.9 billion rubles ($5.9 billion) and expenses - increased by 304.3 billion rubles ($4.9 billion).

GDP assessment for 2016 was increased to 82.815 trillion rubles ($1.33 trillion) from 78.673 trillion rubles ($1.2 trillion), inflation was decreased to 5.8% from 6.4%. The draft amendments also incorporated an increase in domestic borrowing from 300 billion rubles ($4.8 billion) to 500 billion rubles ($8.02 billion).

Such budget deficit is quite alarming, a professor of the RANEPA Chair of Economics and Finance of the Public Sector, Lyudmila Pronina, told Vestnik Kavkaza.

She recalled that in 2016, at the time of the annual budget, the deficit was 2 trillion rubles, or 3.3% of GDP. "Now, the budget deficit reaches 3 trillion rubles, or about 3.6% of GDP. This trend is negative, because as world practice shows, it is necessary to keep a deficit at least at the level of 3%," the expert explained.

On the other hand, according to Pronina, there have been positive trends in fiscal policy, including the possibility of reducing the national defense and security spending. "According to this article, it was planned to cut about 4%, and about a trillion rubles by 2020. At the same time, it will not affect the national defense," a professor of the RANEPA Chair of Economics and Finance of the Public Sector said.

She warned that social expenditures, for example, education, also can be reduced or frozen, however health care spending, on the contrary, slightly increased this year.

If we talk about retirement funds, it is likely that pensions of working pensioners in 2017 will not be indexed. "And I think that the indexation for non-working pensioners will be a very big issue as well," the expert noted.

According to Pronina, the most serious cause for concern regarding the decline in revenues by 370 billion in 2017 is that Russia again loses chances for practical development.

On the other hand, the expert expressed satisfaction with the government's refusal to raise taxes. Lyudmila Pronina also recalled that the government has already raised the excise tax, which affected gasoline prices.

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