Will Russia form three-year budget again?
The Russian government is returning to three-year budget planning.
According to the Kommersant newspaper, on February 26 the Cabinet of Ministers on behalf of the First Deputy Prime Minister Igor Shuvalov addressed the departments with instructions on the implementation of the timetable for the preparation of draft laws on the budget for 2017 and the planning period for 2018-2019.
According to the plan, the one-year budget, which the government formed due to a sudden drop in income and changes in oil market conditions, has exhausted itself. The Cabinet of Ministers is preparing a three-year budget.
The Ministry of Economic Development sent out guidelines for the determination of allocations for 2017-2019 to the departments on March 1, and departments must submit primary projections and statistics to the Ministry of Finance and the Ministry of Energy by March 18, and the Ministry of Labour and Social Security must submit initial proposals on 'the main directions of tax policy for 2017-2019', which relate to insurance fees for the next three years, the newspaper writes.
According to the schedule, the government will discuss the budget structure in two stages. The Ministry of Economic Development will send its scenario conditions for 2017-2019 to the budget committee by March 29, and the Bank of Russia will send its proposals for a three-year monetary policy to the Ministry of Finance and Ministry of Economic Development by April 22, the newspaper says.
The government will receive realistic proposals for the scenario conditions from the Ministry of Economic Development in June. Projections of budget expenditures will be prepared in June-July. The government must approve the budget bill on September 15 and the entire package of documents for 2017-2019 must be prepared by September 21.
Recall, the State Duma approved the law on transition to a one-year budget in 2016 in September 2015.
A professor of the RANEPA Chair of Economics and Finance of the Public Sector, Lyudmila Pronina, emphasized in conversation with a correspondent of Vestnik Kavkaza that a medium-term three-year plan is a more effective fiscal policy than annual planning. "We have been preparing for this for a long time, special amendments were adopted to the Budget Code, so we have had a three-year budget since 2008. And according to the documents, a one-year budget is just a one-year project. In this regard, I was pretty sure that we will return to the three-year planning soon, so this decision is not a surprise," she noted.
The professor admitted that she does not see any preconditions in the financial, economic and social aspects to return to medium-term planning. "All the forecasts say that Russia's GDP in 2017-2018 will be either negative or there will be a slight increase of 0.3% Thus, there is no sustainable economic growth, which is a major prerequisite for a three-year budget, growth should be of at least 1%. In addition, there is a deficit of 3%. The anti-crisis plan for 2016 has no specific stabilization measures affecting the macro-economic indicators, not even all sources of funding are defined," Pronina said.
At the same time, a stable political situation may help the economy. "It's about the withdrawal of Russian troops from Syria, as well as a strengthening of relations with the US and Europe in the fight against Daesh. Perhaps, on this basis, we will be able to get rid of the economic sanctions, eliminating one of the main factors that negatively affects our economy. In my opinion, the positive trends will take effect only after 2017," Lyudmila Pronina stressed.
The expert pointed out that a return to a three-year budget is one of the government's essential tasks. "This is the only possible way to carry out structural reforms, for example, to deal with the issue of advancing social and economic development. Therefore, the return to three-year planning is the right thing to do," the professor of the RANEPA Chair of Economics and Finance of the Public Sector concluded.