Over the period under consideration, substantial financing was allocated to the item ‘National Economy’: 6.1 % of GDP in 2009 against 4.6 % of GDP in 2008. A historic high of the first 11 months of 2009 was displayed by the item ‘Social Policy’ – approximately 11 % of GDP against 8 % of GDP in 2008. A rather substantial growth was demonstrated by expenditures under the items ‘National Defense’ and National Security and Law-Enforcement Activity’. State obligations with regard to financing under these items in the first 11 months of 2009 were executed in the aggregate amount of 5.5 % of GDP, which is by 1.1 p.p. higher than the corresponding index of 2008.
The execution of the RF federal budget in January – December In 2009, the federal level of the budgetary system was charged with the task of supporting some of the sectors of the national economy during the crisis period. According to the preliminary estimates published by the RF Ministry of Finance, federal budget revenue in 2009 amounted to 18.7 % of GDP, which is by 3.6 p.p. of GDP lower than the same index for 2008 (Table 4). The drop in the volume of federal budget revenue in 2009 against last year’s level occurred largely due the declining receipts from the oil and gas sector resulting from the negative changes of the prices on foreign markets and the demand for Russian export commodities. Besides, the consequences of the global financial crisis had a negative effect on the situation in the domestic economy, thus resulting in a decline of the ‘oil and gas’ component of federal budget revenue.
RUSSIAN ECONOMY: TRENDS AND PERSPECTIVES Table THE MAIN PARAMETERS OF THE RF FEDERAL BUDGET IN JANUARY – DECEMBER 2008 AND January – December January – December as % of Deviation 2008 budget revenue and billion billion billion % of GDP % of GDP p. p. GDP expenditure rubles rubles rubles Revenue, including: 9,274.1 22.3 7,336.0 18.7 109.3 – 1,938.1 – 3.Revenues from oil and 4,389.4 10.5 2,983.9 7.6 145.1 – 1,405.5 – 2.gas Deductions to Reserve Fund and National 2,307.9 5.5 902.5 2.3 – – 1,405.4 – 3.Welfare Fund (Stabilization Fund) Expenditure, including: 7,566.6 18.2 9,662.2 24.6 97.2 2,095.6 + 6.interest 1,53.3 0.4 177.8 0.5 87.7 24.5 + 0.non-interest 7,413.3 17.8 9,484.4 24.2 97.4 2,071.1 + 6.Federal budget 1,707.5 4.1 – 2,326.1 – 5.9 78.1 – 4,033.6 – 10.surplus (deficit) Deficit unrelated to revenues from oil and – 2,681.9 – 6.4 – 5,310.1 – 13.5 95.7 – 2,628.2 – 7.gas GDP estimations 41,668.0 3,9212.Source: RF Ministry of Finance (preliminary estimations), IET estimations In 2009, federal budget expenditure increased by 6.4 p. p. of GDP and reached 24.6 % of GDP.
The key reason for this substantial growth of budget expenditure was the impressive size of the anti-crisis package adopted by the RF Government, these measures being aimed at supporting both the population and the enterprises in the real sector. In 2008 – 2009 the overall volume of financing allocated to the anti-crisis measures, quasi-budget sources including, amounted to approximately 3.5 trillion rubles.
According to the preliminary estimates of the RF Ministry of Finance, federal budget deficit as demonstrated by the results of the year 2009 amounted to 2,326.1 billion rubles, or approximately 5.9 % of GDP. The main source for balancing the federal budget was the Reserve Fund, from which 2,964.8 billion rubles was allocated to cover budget expenditure (Table 4). The volume of resources attracted from the oil and gas fund was calculated on the basis of the necessity to ensure 100% financing of the approved budget allocations for the year 2009. However, in actual practice the execution of federal budget expenditure in cash terms amounted to 97.2 %, which resulted in cash residuals formed by the Federal Treasury. Thus, it can be stated that it became possible to fund the implementation of anti-crisis measures in this country without resorting to foreign borrowings due to the accumulation of financial reserves during the period of economic growth, and that the idea of creating special ‘oil and gas’ funds was fully justified and so can be regarded as an asset of the current budgetary policy.
Table DYNAMICS OF THE FORMATION AND USE OF THE OIL AND GAS REVENUES BY THE FEDERAL GOVERNMENT IN 2009, BILLION RUBLES Received in 2009 Used in 2009, to fund:
Indices 4,027.6 1,830.Reserve Fund 488.5 205.0 2964.8 179.(9.7 % of GDP) (4.7 % of GDP) National Welfare 2,584.5 2,769.– 92.5 – – Fund (6.2 % of GDP) (7.1 % of GDP) Fund Fund gas gas ment oil and oil and budget residuals, residuals, balance transfer manageend of revenues revenues adequate of federal end of 2009* from fund THE STATE BUDGET Table 5, cont’d Received in 2009 Used in 2009, to fund:
Indices 6,612.1 4,599.Total 488.5 297.5 2964.8 179.(15.9 % of GDP) (11.8 % of GDP) Source: Federal Treasury.
* residuals as recalculated at the exchange rate as of January Table 6 shows the dynamics of spending the resources of the federal budget in accordance with the functional classification of budget expenditures.
On the whole, the execution of the federal budget in 2009 was by 2.8 p. p. better than in 2008. The greatest improvement rate was demonstrated by the sections ‘Housing and Utilities System’ – 30.p. p., ‘Public Health Care and Sports’ (5.3 p. p.), ‘Interbudgetary Transfers’ (5.7 p. p.), and ‘Education’ (2.3 p. p.).
Table FEDERAL BUDGET EXECUTION IN CASH TERMS IN JANUARY – NOVEMBER 2009, AS A PERCENTAGE OF ANNUAL BUDGET REVENUE AND EXPENDITURE January – January – November 2008 ã. November 2009 ã.
BUDGET EXPENDITURE – TOTAL 79.6 82.Nationwide issues 72.1 70.National defense 74.3 76.National security and law-enforcement activity 83.6 84.National economy 74.7 71.Housing and utilities system 36.5 66.Environment protection 78.4 75.Education 76.2 78.Culture, cinematography and mass media 76.3 82.Public health care and sports 68.6 73.Social policy 81.7 79.Interbudgetary transfers 89.0 94.Source: RF Ministry of Finance; IET estimations Against the backdrop of the generally accelerated spending of federal budget resources as compared to the dynamics of 2008, the execution of a number of items, on the contrary, became slower. In particular, the items ‘Nationwide Issues’ and ‘National Economy’, which were the areas where anti-crisis measures were mainly focused, demonstrated a reduction by 1.7 p. p. and 3.2 p. p. respectively; besides, slower execution of federal expenditure was noted with regard to the item “Social Policy’ – by 1.9 p. p.
In addition, the persistently arrhythmic character of the execution of spending obligations in cash terms should be noted, which is an obstacle to efficient and timely implementation of budget allocations. In particular, in December 2009 a total of about 15 % of annual budget revenue and expenditure was implemented. It is evident that the traditional carry-forward of the bulk of fi ation risks, which can be felt as nancing to a year’s last months is fraught with increased infl early as the beginning of the next year.
An overview of the main developments in the sphere of budgetary policy:
On 30 December 2009, ‘The Main Directions for the RF Government’s anti-crisis measures in 2010’ were approved. The main priority activities of the government for the year 2010 are fer of ment of 2009* enues Fund reFund reoil and oil and budget balance gas revmanagerevenues adequate siduals, end siduals, end of federal from fund gas transRUSSIAN ECONOMY: TRENDS AND PERSPECTIVES determined as follows: social protection of the population; support of the national economy’s revival; ensuring the stability of the emerging positive trends; and intensification of the implementation of measures aimed at building up a modernization model of the economy.
The ongoing implementation, in 2010, of government anti-crisis measures is a response to the perceived necessity of promoting the recovery of the Russian economy after the 2008 – crisis and the acceleration of economic growth. Some of the measures included in the government anti-crisis program for the year 2009 are to be implemented over a long period, and so will be continued in 2010. The volume of funding allocated to the implementation of these measures will amount to approximately 0.5 % of GDP.
Besides, the support of system-forming enterprises will be carried on, but in contrast to the practice typical of 2009, when no strict rules were applied to the distribution of aid between enterprises, the mechanism for providing support in the form of government guarantees has been somewhat upgraded. Support to an enterprise will be provided only if it adopts its own program of strategic development as a recipient of budget funding. The government also intends to implement certain measures aimed at promoting domestic demand. In particular, it is planned to expand state purchases of housing and means of transportation.
In our opinion, while providing financial aid in 2010 to enterprises operating in different sectors of the national economy, it will be necessary to maintain proper balance between support of enterprises and social support of the population. An analysis of the system of anti-crisis measures makes it possible to state that so far there has been a certain evident ‘bias’ towards supporting companies; it should be borne in mind, however, that lack of attention to the support of the population results in lower effect of state funding. A total of 80 % of the overall volume of financing from budget and ‘quasi’-budget sources was allocated to the measures aimed at supporting the financial and real sectors of the economy (in 2008 – 2009), while only 20 % was spent on direct support to the population.
The RF Ministry of Finance links the prospects of improving the yield of budget expenditures to implementing performance-based budgeting mechanisms. On 16 January 2010, RF Minister of Finance A. Kudrin informed Chairman of the RF Government B. Putin of the preparation of the documents designed to improve the cost-effectiveness of budget expenditures. According to Mr.
Kudrin, at present the draft concept for the program aimed at improving the cost-effectiveness of budget expenditures is ready, while the program itself is to be approved by 1 April 2010. As in conditions of post-crisis development the model of annual growth of state expenditure is no longer applicable, the RF Government is now oriented towards reducing the budget deficit, while simultaneously intends to improve the yield on each ruble of allocated budget funding.
The authorities see this goal primarily as ‘re-conversion’, in the next year or two, of the budgets of the majority of state departments into the form of target program methodology1; in other words, it is intended to dramatically increase the share of target programs in the budget, and then to switch over to a program-based classification of budget expenditure. Another direction for improving the quality of administering budget resources is associated with reforming the program and principles of state purchases – among other things, by means of significantly increasing the share of state expenditures in the innovations-linked sector of the national economy.
In our opinion, the main directions for improving the cost-effectiveness of budget expenditure have been selected on a well-substantiated basis. At the same time, any general improvement of the quality of managing budget resources can be possible only is a comprehensive approach to providing the solution to this problem is applied, thus making it possible not only to encompass the broadest possible range of regulatory instruments, but also to properly structure their use over time. In particular, in the next few years (2010 – 2011) it appears necessary to focus on the issues of making the social services rendered by the State more accessible to the population, which can be achieved through restructuring the budgetary network as well as through strengthening, at the basic level, the incentives for more efficient use of budget resources and optimizing certain specific budgeting procedures (incorporation of assessments of the effect of regulation in the ‘technology’ of administrative decision-making with regard to the budget).
1 http://www.interfax.ru/business/news.aspid=THE STATE BUDGET As more institutional structures are formed in this country, further development of some of the more complicated administrative mechanisms (such as performance-based budgeting, target programs, public-private partnership) may become an important factor capable of making the structure of budget expenditure more rational, as well as of improving the overall efficiency of the budgeting process. The implementation of this set of measures must be completed during the period of 2010 – 2015.
RUSSIAN ECONOMY: TRENDS AND PERSPECTIVES INFRASTRUCTURAL PROBLEMS OF THE RUSSIAN GRAIN MARKET N.Karlova The actual grain output and the apparent factors of its further growth indicate that Russia has a great potential for exporting grain. Given the relative stability of domestic consumption and the economic inexpediency of enlarging carryover stocks, the attained and projected grain production levels are well above the domestic demand. Accordingly, there is a need for additional efforts that would make it possible to fully realize grain export potential of the country including complex development of grain market infrastructure.
For two years in succession the crop of grain in Russia has been record high and well above the domestic market demand. In 2008 108.2 million tons of grain were produced; the 2009 net grain output is preliminarily estimated at about 97 million tons (Table 1). Given the extremely large carryover stocks of 19.7 million tons, the beginning stocks in 2009/2010 MY are record high (Table 2). The domestic consumption of grain in Russia does not exceed 77 million tons. So, in the last two years its supply was about 40% bigger than demand. In the new 2009/2010 MY production will exceed domestic consumption by 20 million tons and the market surplus of grain taking into account carryover stocks will be about 40 million tons.