By all appearances, a hard fight will take place at the election – for power it is important to fix significant outrunning of “Single Russia” from other subjects of political process, having bargained with them during the election, to prevent a conter-campaign. However, basing on the data of the sociologic surveys, the “Single Russia” indicators do not exceed 20%. On the contrary, both left-wing and rightwing parties have good chances to collect the “anti single Russia” majority – naturally, if the forthcoming campaign is conducted without violation of rules. No less important also - what will be the outcome of the “fight” of opposition parties for manual counting of voices (at the election in Moscow “electronic accounting” will be employed at least at one third of the polling stations).
Sergey Zhavoronkov On the Course of Reforms in August- September The new initiatives were “voiced” by the President in September. The main point at issue: new priorities. However, the question arises whether the new initiatives are planned to be implemented together with the reforms or being their substitution. It is seen from the Government activities in August and September that the latter is more likely to be true in reality. The real activities started in September by the Agency on Administration of Special Economic Zones, to which the tasks were assigned by the Government on an increase of the volume of investments in the economy and the speedup of economic growth.
It’s second time in succession in half a year that the hasteless government activity (or rather its inactivity) was “exploded” by the President. In spring it was the President’s Address, now - public speaking at the meeting with the Cabinet members and representatives of the two chambers of the Federal Assembly. His speech can be summed up as follows: an attempt to take popular measures, that can be implemented (in contrast to complex reforms) using the current potential of the government office, without imposing considerable burden on the budget and creating macroeconomic disbalances.
Below is the executive summary of the speech:
Procurement of a new diagnostic equipment and equipping of 10 thou. of municipal polyclinics (including villages), district hospitals and feldsher's stations. Enhancing the efficiency of existing centers of high technologies, construction of new (in Siberia and the Far East in the first place) ones. Increasing (4 times) by the 2008, in comparison with 2004, the number of persons per year, to whom a quality medical aid (with the use of high technologies) is rendered (primarily this concerns children).
Increasing by early 2006 (i.e. within 2005) the salaries of primary care physicians, pediatricians and general practitioners by Rb 10000, sick nurses – by Rb 5000. Well-defined coordination between the amount of payment in healthcare and the volume and quality of provided services. Provision of training for over 10000 sector doctors and general practitioners. Modernization of the fleet of ambulances, including procurement of reanimobiles, medical equipment and communications facilities.
Allocation of considerable means for: acquiring for innovation schools and higher education institutions of the laboratory equipment and software, for modernization of classrooms and training of teachers (tenths of higher education institutions and thousands of schools in the country). Connection to the Internet within two years 20 thousand schools at a minimum (by the 2008 the number of such schools should number no less than 30 thousand (a half of all Russian schools). Liquidation of direct dependence of salaries of teachers on the number of given lessons, transition to a new wage system basing on the quality of teaching. Establishment of annual encouragement at Rb 100 thousand for 10000 of best teachers of the country. Completing in the 2006 a transition to normative financing of the teaching process, wherein “budgetary funds follow the students”.
Opening of business-schools for training of administrative personnel in St.-Petersburg and the Moscow region, attraction of business and regional authorities to participate in those projects (provide the highest level of training in them).
In Housing Policies Increasing in 2007, in comparison with 2004, the volume of housing construction by one third at a minimum. Allocation of funds from the budgets of all levels for equipping the land sites with engineering infrastructure.
Completion of the formation of legal base on mortgage lending. Development of the mechanisms of subsidizing of mortgage credits. Serious increase of the authorized capital of АИЖК, is granting to it state guarantees.
Demonopolization of the Housing and utilities sector (HUS), the systems of public transport and communications, carrying out structural changes in those industries.
In Agriculture Ensuring agricultural producers the real access to credit resources. Allocation of extra funds Allocation of extra-budgetary resources in the federal budget for subsidizing of interest rates on credit got construction and modernization of animal production units. Allocation of considerable resources for the development of agricultural leasing.
Building in 2006-2007 the system of mortgage crediting on security of agricultural land sites Abolishment of import duties for processing equipment for cattle breeding, that has no domestic analogues (considering similar measures in other industries) Special attention is attached in the speech to the necessity of continuing the system modernization in all the aforementioned spheres. Creation of the Council has been announced for implementation of priority national projects under the Presidential control.
How is it possible to comment this speech First, it is obvious that all those measures are popular.
Second, they are one hundred-per-cent realizable and easily controllable, as quantitative characteristics of the desired result have been named. Third, they are capable to mitigate, for a while (как раз до 2008 года) acuteness of problems in the announced in the speech sectors without conducting considerable reforms. Fourth, the measures will not lead to the budget imbalance and will not significantly affect macroeconomic indicators (including inflation). That is about positive things.
Now let us say about negative things. The aforementioned measures are nonsystem. They are able to solve none of serious problems existing in the listed sectors, except for, maybe, the housing sector, and only in that part of it where they could still take system actions over the past year. It’s clear that such measures will be taken “instead of” the reforms, rather than “with” the reforms: reforms – is a less defined notion, it cannot be distinctly expressed quantitatively. The practice shows that nobody is fired for non-implementation of this or that reform. The population would not also be concerned about it, because it is not aware of the essence of most of reforms. It’s not by chance that even those moments in the speech that have direct relation to reforms (“well-defined coordination between the amount of payment in healthcare and the volume and quality of provided services” etc.) are not expressed quantitatively and not limited in time. Quite another thing – concrete measures that wee suggested during the speech – they are expressed quantitatively, their fulfillment will be watched accurately by president and the population, and, no doubt, anyone will be fired for their non-fulfillment, especially on the threshold of the election.
A pessimistic conclusion suggests itself: it is apparent that no reforms will be conducted in the above sectors until the 2007. And if, earlier, by national projects was meant system transformations – in the educational sphere, healthcare, housing, the army, and other fields, now by this term is meant, in point of fact, the MinFin current task – to ensure allocation of necessary funds for the “sounded” needs. Despite the fact that a special council was organized for supervision of its execution.
To tell the truth, there is here the reason for optimism. Considering the current Cabinet of Ministers it’s hard to hope that qualitative and system reforms will be conducted – practically each of the reform can be distorted to the property of being unrecognizable. While, in this situation, nobody would do a harm, and the situation in most important spheres of the economy will be “freezed unspoiled” – apparently to the next Cabinet.
Another important event of September – rapid advancements in the field of creation of special economic zones. It’s hard to remember a precedent, when an agency was established and began to act within a month after a law was put into effect, most part of subordinate acts were adopted, the tender for creation of zones was announced and bids were being filed. Such an activity of the Government could only be welcomed, since no more positive could be added in its favor over the past two months.
Budgetary and Fiscal Policy The federal budget revenues accounted for 24.97% of GDP, the federal budget expenditures accounted for 15.95% of GDP, and the federal budget surplus accounted for 9.02% of GDP, according to the preliminary data on execution of the RF federal budget in the period between January and August 2005. In the period between January and July 2005, the RF consolidated budget revenues accounted for 37.6% of GDP, the RF consolidated budget expenditures accounted for 26.7% of GDP, and the budget surplus was 11.0% of GDP. As of September 1, 2005, the value of the RF Stabilization Fund totaled 721.0 bln rubles against 617.9 bln rubles as of June 1, 2005. The amount of funds deposited in the Stabilization Fund totaled 832.1 bln rubles as opposed to that as of August 1 of the same year, 721.0 bln rubles.
State Budget Position The federal budget was executed to the amount of 3 233.97 bln rubles (24.97% of GDP ) in terms of revenues, and 2 066.19 bln rubles (15.95% of GDP ) in terms of expenditures, according to the preliminary estimation of budget execution by cash in the period between January and July 2005 as made by the RF Ministry of Finance. The federal budget surplus amounted to 1 167.79 bln rubles ( 9.02% of GDP ). It should be noted that the volume of revenues to the federal budget in 2005 exceeds considerably that of 2 114.92 bln rubles ( 20.6% of GDP ) in the corresponding period in 2004. The federal budget expenditures in the period between January and August 2005 also grew against the corresponding parameter in 2004 in real terms, but slightly reduced in terms of GDP shares ( 1 630.bln rubles or 15.9% of GDP in 2004 ). The budget surplus over the period under review also exceeds considerably the corresponding parameter in 2004 ( 484.17 bln rubles or 4.7% of GDP ).
The volume of federal budget revenues totaled 412.79 bln rubles and 434.79 bln rubles respectively, which accounts for 22.66% and 22.55% of the monthly GDP, in the period between July and August 2005. The Federal budget expenditures totaled 318.55 bln rubles ( 17.48% of GDP ) and 303.44 bln rubles ( 15.74% of GDP ) respectively, the federal budget surplus totaled 94.24 bln rubles and 131.bln rubles respectively, which accounts for 5.17% and 6.81% of GDP respectively, in the period between July and August 2005. 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 August as compared to July.
The structure of budget revenues inflow over the period under review is shown in Table 1.
According to Table 1, most of the budget revenues generated in August 2005 were represented by taxes and other payments administered by the Federal Tax Service ( 11.60% ), as well as taxes and payments administered by the Federal Customs Service ( 10.01% ). 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 0.94% of GDP. Hence tax revenues at the end of August 2005 were slightly reduced as compared to the corresponding parameter calculated for the end of July of the same year.
The RF Ministry of Finance’s preliminary data on financing of the RF federal budget expenditures in the period between January and August 2005 are listed in Table 2.
Revenues of the RF Federal Budget in the Period Between June, July and August ( in terms of percentage of GDP, by Cash Execution ) Cash Execution June July August Taxes and other payments adminis12.04% 11.98% 11.60% tered by the Federal Tax Service Taxes and payments administered by 10.05% 9.34% 10.01% the Federal Customs Service Revenues administered by the Federal Agency for Federal Property Manage- 0.27% 0.16% 0.27% ment Federal budget revenues, administered 2.49% 1.17% 0.67% by other federal agencies Total revenues 24.86% 22.66% 22.55% Table 2.
Financing of the RF Federal Budget Expenditures in the Period Between January and August 2005 ( in terms of percentage of GDP ) Financing of expenditures January - June January - July January - August Nationwide issues, 2.56% 3.24% 3.04% of which central government and municipal debt ser1.14% 1.66% 1.48% vice National defense 3.04% 3.53% 3.17% National security and law enforcement 2.22% 2.64% 2.42% National economy 1.04% 1.15% 1.17% Municipal housing economy 0.02% 0.03% 0.03% Environmental protection 0.03% 0.03% 0.03% Education 0.95% 0.94% 0.85% Culture, cinematography and mass media 0.23% 0.25% 0.24% Health care and sport 0.45% 0.53% 0.49% Social policy 0.92% 1.06% 0.98% Intergovernmental transfers 6.02% 7.26% 6.75% Total Expenditures 17.49% 20.64% 19.18% It can be noted that a share of financed federal budget expenditures accounted for 19.18% of GDP at the end of August 2005, which is markedly below the corresponding parameter at the end of July of the same year. In addition, it should be noted that the tendency for reduction of a share of financed revenues in the GDP resumed its movement that was observed in the period between April and June 2005. Intergovernmental transfers ( 6.75% of GDP ), national defense ( 3.17% of GDP ), nationwide issues ( 3.04% of GDP ), including central government and municipal debt service ( 1.48% ), and national security and law enforcement ( 2.42% of GDP ) received biggest volume of financing. Other expenditure items accounted for nearly 3.8% of GDP in total.
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