The second, though less realistic variant, is as follows. The possibility and real threat of total election engineering required to get rid of both – a rival, dangerous in the sense of PR, and ensurance of civil control, adding it also a judicial “brand of a fascist”. On the other hand, an open political banditism, that liquidates the second in the last two months opposition project (after the Russian party of pensioners), but this time parliamentary, may prematurely lead D.Rogozin, as well as the whole opposition to radicalization and consolidation, which is disadvantageous for the power.
Sergey Zhavoronkov On the Course of Reforms in October-November Over the last two months, as during the whole year we cannot observe any serious advancement in the ;sphere of reform realization. As concerns the current activities of the government bodies, which can hardly be regarded as reforming, to some extent we may attribute to the latter only,the nest round of negotiation of the medium-term program in the government, discussions on principles of limitation of foreign investments and (the latest in a series) “reanimation” of the idea of lowering VAT to percent. Oppositive to the said are the President’s activities – in September these were new initi7atives on the national projects, in November – series personnel replacements.
Radical personnel decisions of the President – introducing the positions of the First Vice Premier and another “simple” Vice Premier with simultaneous assignment of a new head of the President’s Administration – to a great extent broke the existing “bad” status quo in the Government (when the ministers and Premier actually blocked each others initiatives, and the government, virtually, was inactive). There appeared chances that with assignment of D.Medvedev as First Vice Premier, who was responsible for “national projects”, that were announced by President in September, those project may have real reforming content and chances to efficient implementation.
Furthermore, chances appeared that there will be the more efficient mechanism, to agree the interests of the ministries within the frame of the Government, as it is clear that D.Medvedev is more influential in terms of such a linking unit than Fradkov and Zhoukov.
It’s not fair enough, but such psychological sensation by itself makes political reality. It’s not by chance that “Single Russia” introduced a “draconian” 10% barrier on these elections and cancelled the column “against everybody”.
The immediate future will show how these chances can be used. The more so, it is soon already:
since February next year the money allocated for National projects will start to be spent, while in the first effect is to be obtained form the national projects.
During the October and November the results of the first contest of regions for the formation of special economic zones will be brought in the Government (and, to be more precise, in the Agency for management of special economic zones). From more than 70 applications there were accepted only six: four applications for the creation of technical and introduction zones (Zelenograd, Dubna, St.Petersburg and Tomsk) and two ones for industrial-production (the Lipetsk Region and Tatarstan). The small number of accepted applications evidences both - the regions all the same could worthily be prepared to the contest, and that the Government very carefully selected the first projects, trying by all means to avoid possible discredit of new initiative.
Next year we will see if special economic zones are the real factor of economic growth in Russia, as well as an impetus for launching the reforms capable to provide equally favorable conditions for entrepreneurial activities across the whole country, or stay small centers of entrepreneurship in the country, which is totally hostile to business.
Some progress took place in the administrative reform over the past period, not in terms of its considerable advancement, but in terms of correction of unsuccessful features of the part of the report that had been conducted. We mean actual abolition of the “rule of two deputies” in the federal ministries.
For one thing, in all the ministries there appeared a third deputy, responsible for connection with the Federal Assembly (secretaries of state), but, judging by the pronouncements of the premier, it is not excluded that the number of deputies will further be also increased. It is obviously should not be considered as refusal from the principles of administrative reform – from the very beginning the decision on so sharp decrease of deputies appraised negatively by most of experts (see the material of May 2004). The time passed since that moment only confirmed incorrectness of that step.
A “jolt of fresh air” was added to expert debates (which are ridden to death) by discussions about the principles and mechanisms of regulation of foreign investments in the strategically important sectors of Russian economy. It was not once that President Putin mentioned (including his Address) the necessity of development of respective legislation in this ;sphere. The draft law concerning this area, that had been developed in the Russia's Industry and Energy Ministry, was seriously criticized because of not clear system of access of foreign investors, as well as the absence of a secret list of branches and enterprises (about the necessity of which was directly stated in the Address of the President), which are either limited or forbidden for foreign investment. By December the draft law is to be completed with account of the results of conducted discussions and again be introduced for debate.
October saw further development of the situation with lowering of VAT to 13%. Being put off for long even early in the year it was “reanimated” by the premier as if being a fail-safe means capable to resist the lowering of the economic growth rates. Not trusting in the opinions of most of experts on minor positive effect of such lowering on the economic growth, with sharply increasing risks of budgetary stability, the premier continues and, perhaps, will continue to insist on that measure. Though he never took an individual decision, preferring not to be personally responsible for possible negative consequences, one may expect this theme will be aroused for long, particularly, considering that it’s not clear as yet what should be done to overcome the trend towards lowering the economic growth rates.
These days, the theme of macroeconomic dynamics, primarily inflation dynamics, is interesting from the point of view of politics and economy. At least two structural measures, the so-called minireforms, were conducted for the purpose of controlling rising prices: first the government tried to establish order on regional fuel markets, and also make some correction in the taxation system concerning taxation of the energy sources because of sharp rise in prices for gasoline, then a number of measures had been taken for controlling the prices of HUS (housing and utilities sector) services. And if the first part of structural measures may somewhat be supported, the second one (in the sphere of HUS) – is a clear action against the reform: transferring the issues of setting HUS tariffs from local to federal level, is capable, perhaps, to reduce the inflationary pressure of this part of basket on inflation, but will never be promotive of raising the financial stability of HUS and growth of investment in municipal infrastructure.
In conclusion one cannot but mention of the next round of discussions of the medium-term Government program: it is once again submitted to the Government for consideration, but in this case there is good reason to believe that it won’t be “brought away” back to the Ministry of Economic Development and Trade of Russia. There are chances that it will be additionally agreed in the Government Office and adopted either at the end of this year or at the beginning of next year. It should be said, though, that most likely little is going to be changed, as the main activity of the government for the following three years will become not medium-term plans, but implementation of the national projects and preparing elections.
Budget and tax policies Judging by the preliminary results of the budget’s execution in January through October 2005, the expenditure level of the RF federal budget amounted to 24.26% of the GDP, while budget surplus was 8,34% of the GDP. In January through September 2005 the revenues of the RF consolidated budget amounted to 36,0% of the GDP, consolidated budget expenditures – to 27.2% of the GDP, and budget surplus – to 8,8% of the GDP. As of 1 November 2005, the amount of the RF Stabilization Fund was 1094.5 billion roubles, as compared to 960.7 billion roubles as of 1 October of this year.
The status of the state budget According to the preliminary estimates made by the RF Ministry of Finance concerning the budget’s execution in cash terms in January through October 2005, the federal budget was executed in respect to its revenues in the amount of 4 143.54 billion roubles (24.26% of the GDP), and in respect to its expenditures in the amount of 2 718.54 billion roubles (15.92% of the GDP). Federal budget surplus amounted to 1 424.99 billion roubles (8.34% of the GDP). In should be noted that the volume of federal budget revenues in 2005 is much higher than that during the corresponding period of the year 2004, which was 2 746.68 billion roubles (20.2% of the GDP). Federal budget expenditures in January through October 2005 have also grown, as compared to the corresponding index of 2004 (2 054.33 billion roubles, or 15.1% of the GDP). The budget surplus in the period under consideration is also considerably higher than that in 2004 (692.35 billion roubles, or 5.1% of the GDP).
The volume of federal budget revenues in September and October 2005 amounted to 467.09 billion roubles and 437.46 billion roubles, respectively, or to 21.07% and 23.19% of the monthly GDP. Federal budget expenditures in September and October 2005 were 445.76 billion roubles (21.35% of the GDP) and 209.08 billion roubles (10.38% of the GDP), respectively, federal budget surplus – 5.billion roubles and 258.01 billion roubles, constituting, in respect to the GDP, 0.29% and 12.81%, respectively. Judging by these figures, it can be concluded that the RF federal budget revenues are continuing to grow, while the expenditures are demonstrating a decline.
The structure of revenues in the period under consideration is shown in Table 1.
The RF federal budget revenues in August, September and October (as a percentage of the GDP, budget execution in cash terms) Execution in cash terms August Septem- October ber Taxes and other payments adminis11.59% 10.96% 12.21% tered by Federal Tax Service Taxes and other payments adminis10.01% 9.36% 9.82% tered by Federal Customs Service Revenues administered by Federal Agency for Management of State 0.27% 0.28% 0.68% Property Revenues of federal budget adminis0.81% 0.46% 0.49% tered by other federal bodies Total revenues 22.69% 21.07% 23.19% As seen in Table 1, the main bulk of tax revenues in October 2005 was constituted by the taxes and other payments administered by the Federal Tax Service (12.21%), as well as by the taxes and other payments administered by the Federal Customs Service (9.82%). It should be noted that in October, after a one-month downward trend, the revenues from the taxes and other payments administered by the Federal Tax Service, became once again stabilized somewhere around the average monthly figures. The rest of the revenues was constituted by those administered by the Federal Agency for the Management of State Property, as well as by the federal budget revenues administered by other federal bodies. The aggregate amount of these revenues in respect to the GDP constitutes about 1.17% от of the GDP.
The preliminary data on the financing of the federal budget expenditures in January through September 2005 submitted by the RF Ministry of Finance РФ are presented in Table 2.
The volumes of financing of RF federal budget expenditures in January - September 2005 (as % of the GDP) Financing of expenditures January - January - January - August September October General state issues 3.03% 2.88% 2.91% of these, servicing of state and municipal debts 1.47% 1.34% 1.34% National defense 3.16% 2.88% 2.93% National security and law-enforcement activity 2.42% 2.37% 2.40% National economy 1.17% 1.17% 1.21% Housing and utilities system 0.03% 0.03% 0.03% Environment protection 0.03% 0.02% 0.03% Education 0.85% 0.80% 0.88% Culture, cinematography and mass media 0.24% 0.24% 0.24% Public health care and sports 0.49% 0.49% 0.49% Social policy 0.98% 0.91% 1.01% Interbudgetary transfers 6.74% 7.56% 6.93% Total expenditures 19.14% 19.35% 19.05% It is noteworthy that as of the end of October the share of the federal budget’s financed expenditures in the GDP was 19.05%, which is somewhat lower that the similar index achieved by the end of September 2005. The highest volume of financing was seen in respect to interbudgetary transfers (6.93% of the GDP), national defense (2.93% of the GDP), general state issues (2.91% of the GDP), including the servicing of state and municipal debts (1.34%), and national security and law-enforcement activity (2.40% of the GDP). The total of the other expenditures constituted about 3.88% of the GDP.
As seen by the results of the period of January through September 2005, the RF consolidated budget incomes amounted to 36.0% of the GDP, as compared to 31.9% of the GDP during the same period of 2004. The consolidated budget expenditures grew, as compared to the similar index of 2004 (26.0%), amounting to 27.2% of the GDP. The consolidated budget surplus in January through September was 8.8% of the GDP, or considerably higher than a similar index in 2004 (5.9%). Thus, the year saw a marked growth in the RF consolidated budget incomes against the background of almost unchanging expenditures, which resulted in the noted substantial growth in the consolidated budget surplus.
As of 1 November 2005, the amount of the RF Stabilization Fund was equal to 1094.5 billion roubles, as compared to 960.7 billion roubles as of 1 October of this year.
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