Administrative pressure is continued to be exerted on M. Kasianov – he is charged in “incorrect” privatization of the official cottage, against which a criminal case was initiated. It is indicative, that relative requests were sent by the deputy of State Duma G.D. Hinshtein, who is considered to be close to the head of “Single Russia” B. Gryzlov. Nonetheless, by end of August Kasianov returned to Russia, though up until now he did not take any serious political steps, long expected from him by the participants of the political process and experts.
The significant event took place in August. The group of left-wing activists (NBP, AKM, youth “Motherland” and SKM) gathered in the premise of the city committee of communists to conduct a meeting associated with preparing every year by opposition movement a street march “Anticapitalism -2005”. When the participants began going into the street there were attacked by an organized group of bandits with bats, several people received permanent injuries. About 25 bandits in an orderly manner tried to disappear by bus, but were detained by police guards and were brought to the Department of Internal Affairs “Danilovskoye”. As it turned out they were organizers of the so-called antifascist movement “Nashi”, established under the guidance of Administration of the RF President, who were earlier seen, but not seized in launching attacks on opposition activists. Later all detainees were released and there were delivered to their homes in police cars, while there appeared a great number of publications in mass-media on “the fight of skinheads with Azerbaijanians” organized by “limonovtsy” (members of “Limonov” party) themselves, etc. It is evident that significance of this incident is not in receiving traumas by the oppositionists (this constantly occurs as a result of actions of the power structures), and not in the common fact of piecemeal actions between the encouragers of bandits and The previous deputy M. Zadornov went to Vneshtorg.
The new effective law says nothing about the possibility of alternative hand-held voice re-count and many representative of authority treat it so that re-count is not possible. It is natural that it is impossible to trust in elections with previously “known” results. In Moscow electronic urns are planned to be introduced on the overwhelming majority of polling stations.
4 Among the major events conducted by “Nashi” this summer there was their meeting with Vladimir Putin.
policemen. Progovernment illegal armed units are well known in history (Latin-American “paramilitares”, the so-called "kadyrovtsy” in Chechnya) and are used, as a rule, where the official structures are not reliable for various reasons. Actually, Moscow may be regarded such a territory.
S. Zhavoronkov Budgetary and Fiscal Policy According to the preliminary data on execution of the RF federal budget in the period between January and July 2005, the federal budget revenues accounted for 25.39% of GDP, the federal budget expenditures accounted for 16.0% of GDP, and the federal budget surplus accounted for 9.4% of GDP.
In the period between January and July 2005, the RF consolidated budget revenues accounted for 38.2% of GDP, the RF consolidated budget expenditures accounted for 26.6% of GDP, and the budget surplus was 11.6% of GDP. As of August 1, 2005 the value of the RF Stabilization Fund totaled 721.0 bln rubles against 617.9 bln rubles as of June 1, 2005. Such a substantial reduction of the Stabilization Fund was caused by withdrawals to the amount of 430.1 bln rubles in repayment of the RF foreign debt to the Paris Club creditors in April.
State Budget Position According to the preliminary estimation of budget execution by cash in the period between January and July 2005 made by the RF Ministry of Finance, the federal budget was executed to the amount of 2 796.21 bln rubles ( 25.39% of GDP ) in terms of revenues, and 1 761.34 bln rubles ( 16.0% of GDP ) in terms of expenditures. The federal budget surplus amounted to 1 034.87 bln rubles ( 9.4% of GDP ). It should be noted that the volume of revenues to the federal budget in 2005 exceeds considerably that in the corresponding period in 2004, which was 1 912.55 bln rubles ( 21.6% of GDP ).
The federal budget expenditures in the period between January and July 2005 also grew against the corresponding parameter in 2004 in real terms, but slightly reduced in terms of GDP shares ( 1 398.bln rubles or 15.8% of GDP in 2004 ). The budget surplus over the period under review also exceeds considerably the corresponding parameter in 2004 ( 514.54 bln rubles or 5.8% of GDP ).
In the period between June and July 2005, the volume of federal budget revenues amounted to 419.60 bln rubles and 409.81 bln rubles respectively, which accounts for 24.86% and 22.64% of the monthly GDP. In June and July 2005, the Federal budget expenditures amounted to 215.63 bln rubles ( 12.77% of GDP ) and 317.14 bln rubles ( 17.52% of GDP ) respectively, the federal budget surplus was 203.97 bln rubles and 92.67 bln rubles respectively, which accounts for 12.08% and 5.12% of GDP respectively. Hence it should be noted that the RF budget revenues increased, while budget expenditures were reduced both in real terms and percentage-wise to GDP in July as compared to June.
The structure of budget revenues inflow over the period under review is shown in Table 1.
Revenues of the RF Federal Budget in the Period Between May, June and July ( as % of GDP, by Cash Execution ) Cash Execution May June July Taxes and other payments adminis12.75% 12.04% 12.07% tered by the Federal Tax Service Taxes and payments administered by 9.49% 10.05% 9.40% the Federal Customs Service Revenues administered by the Federal Agency for Federal Property Manage- 0.18% 0.27% 0.17% ment Federal budget revenues, administered 0.96% 2.49% 1.01% by other federal agencies Total revenues 23.38% 24.86% 22.64% Table 2.
Financing of the RF Federal Budget Expenditures in the Period Between January and July 2005 ( as % of GDP ) Financing of expenditures January - May January - June January - July Nationwide issues, 3.13% 2.56% 3.24% of which central government and municipal debt service 1.48% 1.14% 1.67% National defense 3.57% 3.04% 3.53% National security and law enforcement 2.64% 2.22% 2.64% National economy 1.29% 1.04% 1.15% Municipal housing economy 0.04% 0.02% 0.03% Environmental protection 0.03% 0.03% 0.03% Education 1.14% 0.95% 0.94% Culture, cinematography and mass media 0.26% 0.23% 0.25% Health care and sport 0.52% 0.45% 0.53% Social policy 1.12% 0.92% 1.06% Intergovernmental transfers 7.31% 6.02% 7.26% Total Expenditures 21.05% 17.49% 20.66% Table 3.
Execution of the RF Consolidated Budget in the Period Between January and July 2005 ( as % of GDP ) I II III IV V VI VII VIII IX X XI XII Taxes* 28.7% 23.6% 24.3% 26.5% 26.6% 25.9% 26.4% 25.9% 25.2% 25.4% 25.4% 25.5% Revenues 32.9% 31.3% 31.4% 33.6% 33.6% 32.7% 33.3% 32.5% 31.7% 32.0% 32.1% 32.1% Expenditures 18.3% 23.7% 26.0% 28.4% 28.4% 28.8% 29.1% 28.9% 28.4% 29.3% 29.7% 31.1% Deficit / 7.7% 5.4% 5.3% 5.2% 3.8% 4.2% 3.7% 3.3% 2.7% 2.4% 1.0% 14.6% Surplus I II III IV V VI VII VIII IX X XI XII Taxes* 25.6% 24.4% 25.6% 27.4% 27.1% 26.0% 26.1% 25.7% 5.0% 5.0% 5.1% 25.2% Revenues 32.0% 30.3% 31.5% 33.4% 33.6% 32.2% 32.2% 31.6% 0.9% 0.8% 0.7% 31.1% Expenditures 20.7% 25.3% 27.7% 28.8% 28.8% 28.6% 28.7% 28.5% 8.2% 7.8% 7.9% 29.7% Deficit / 11.3% 5.0% 3.8% 4.5% 4.7% 3.5% 3.6% 3.1%.7% 3.0% 2.8% 1.4% Surplus I II III IV V VI VII VIII IX X XI XII Taxes* 6.1% 21.8% 27.4% 27.4% 26.6% 27.2% 27.1% 26.4% 26.5% 26.9% 26.8% Revenues 30.6% 28.2% 29.8% 32.9% 32.9% 32.5% 33.1% 32.9% 31.9% 32.0% 32.3% 32.3% Expenditures 18.5% 22.8% 25.4% 27.3% 26.9% 27.0% 27.0% 26.9% 26.0% 25.9% 26.1% 27.8% Deficit / 12.1% 5.4% 4.4% 5.6% 6.0% 5.5% 6.1% 6.0% 5.9% 6.1% 6.2% 4.5% Surplus I II III IV V VI VII VIII IX X XI XII Revenues 48.8% 40.3% 40.3% 40.8% 38.8% Expenditures 22.2% 23.3% 24.9% 27.1% 26.5% Deficit / 26.5% 17.0% 15.4% 13.7% 12.3% Surplus According to Table 1, most of the budget revenues generated in July 2005 were represented by taxes and other payments administered by the Federal Tax Service ( 12.07% ), as well as taxes and payments administered by the Federal Customs Service ( 9.4% ). Other tax revenues were represented by the revenues administered by the Federal Agency for Federal Property Management, and the RF federal budget revenues administered by other federal agencies. Total amount of these revenues accounted for nearly 1.18% of GDP. Hence tax revenues at the end of July 2005 slightly increased as compared to the corresponding parameter calculated for the end of June of the current year.
The RF Ministry of Finance’s preliminary data on financing of the RF federal budget expenditures in the period between January and July 2005 are shown in Table 2.
It should be noted that a share of financed federal budget expenditures accounted for 20.66% of GDP at the end of July, which is markedly below the corresponding parameter at the end of June 2005.
In addition, it should be noted that the tendency for reduction of a share of financed revenues in the GDP in the period between April and June 2005 ceased to move on. Intergovernmental transfers ( 7.26% of GDP ), national defense ( 3.53% of GDP ), nationwide issues ( 3.24% of GDP ), including central government and municipal debt service (3.24% ), and national security and law enforcement ( 2.64% of GDP ) received biggest volume of financing. Other expenditure items accounted for nearly 3.99% of GDP in total.
At the end of the period between January and June 2005, the RF consolidated budget revenues accounted for 38.2% of GDP against 32.5% of GDP over the corresponding period in 2004. The RF consolidated budget expenditures declined slightly as compared to the corresponding parameter in 2004 ( 27.0% ) and accounted for 26.6% of GDP. Surplus of the RF consolidated budget accounted for 11.6% of GDP in the period between January and June 2005, which is more than twice as much as the corresponding parameter in 2004 ( 5.5% ). Hence there was a marked growth in the RF consolidated budget revenues in 2005 at the backgrounds of almost unchanged expenditures, which resulted in such a considerable growth in the budget surplus.
As of August 1, 2005, the value of the RF Stabilization Fund totaled 721.0 bln rubles against 617.bln rubles as of July of the current year.
Main Events in Budgetary Sector.
In the beginning of August, the RF Minister of Finance А. Kudrin announced that the RF Government was about to consider an issue concerning introduction of a simplified procedure of declaring previously undeclared incomes by physical bodies. This procedure may take effect as early as January 1, 2006. It provides for that physical bodies should transfer such incomes to the accounts of credit organizations by using a simplified procedure, pay 13% income tax whereby be released from any sanctions concerning violation of the RF Tax Law. It was also announced that the RF Ministry of Finance had already prepared a corresponding draft law. Should the RF Government approve this draft law, it would be submitted to the RF State Duma for consideration in the first place within a month, noted А. Kudrin.
A tripartite commission for Intergovernmental Relations Improvement made several decisions at its meeting held on August 9, 2005. In particular, the Commission approved a new procedure of alcohol excises distribution in 2006. It was expected previously that all excises should be centralized and distributed by inflow, said А. Siluanov, Head of the Intergovernmental Relations Department of the RF Ministry of Finance. However, the final procedure had to be updated with consideration of the drawbacks concerning lack of incentive in working with taxpayers that were disclosed by the regions. The final procedure provides for that alcohol excises levied from production enterprises located in these regions will not be distributed by inflow standards until 20% of these is retained by a constituent entity of the Russian Federation, while the other 80% is centralized in 2006. The approved procedure is expected to encourage the regional government authorities in their work with taxpayers and evenly distribute incomes between the regions, said А. Siluanov.
А. Siluanov also said during the work of the Commission that regional revenues are expected to increase by 14.5% or up to 3 trillion 149 bln rubles with allowance for support from the federal budget in 2006, according to the estimates of the RF Ministry of Finance. A share of the federal budget support would remain similar to this year, i.e. 15.8%. Property tax shows the fastest growth rate (revenues from this tax increased by 44%) in the regional revenues structure. In addition, А. Siluanov noted that the regional development fund would total 2,7 bln rubles and be used for co-financing the programs and projects adopted and developed by the constituent entities of the Russian Federation in 2006. The fund will be used to promote formation of municipal development funds at the constituent entities of the Russian Federation.
Russia completed early repayment of a portion of its foreign debt due to the members of the Paris Club of creditors on August 22. A total of more than $15 bln was transferred in early repayment of debt since the mid-July. The foreign debt of the former USSR was reduced down to $28 bln. The funds for the repayment were delivered from the Stabilization Fund of the Russian Federation. In addition, according to the RF Minister of Finance А. Kudrin, Russia may make early repayment of a portion of its foreign debt due to creditors other than those from the Paris Club in the period between the end of August and 2005 year end.
D. Polevoi Monetary Policy in the Russian Federation Growth rates in consumer prices continued to slow down in July 2005: the consumer price index equaled 100.5 in July 2005 ( as compared to 100.9 in July 2004 and 100.6 in June 2005 ). In July, the Russian Federation saw a growth in money supply: the monetary base increased by 2.4%, while the RF gold and foreign exchange reserves were reduced by 4.6% after repayments of the Russian foreign debt. The Russian Federation transferred its final tranche in early repayment of the debt to the Paris Club of creditors in August. The Bank of Russia announced that a new denomination of banknotes ( 5000 rubles ) will be issued for circulation in 2006.
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