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from 4% to 20%. All told, the Ministry of Finance projects that its “revenue mobilization” program will earn the budget RUB1.8 trillion.
Yet with both these cost-saving and income-boosting strategies in place, Russia’s federal budget will still spend notably more than it will receive next year (21.5 vs.RUB18.8 trillion). To fill this gap, the Ministry of Finance will increase borrowing. Finance minster Anton Siluanov says that Russia’s state debt will rise to 21.3% of GDP by 2023 (up from 12.2% in 2019).
Three year plan
The new, three-year draft budget, obtained by Kommersant, e nvisages spending in 2021 exceeding the level set by the budget adopted in 2019 by RUB300bn (or about $4bn). Compared to the pre-crisis plan, a RUB600-bn ($8-bn) decrease in spending is expected in 2022.
The Finance Ministry explains that the easing of budget policy is due to the fact that in 2020, the Russian economy will fall by less than was expected back in July (4% of GDP versus 5%). The budget deficit also won’t be as large — the same 4% of GDP (a little over RUB4 trillion or $53.3bn), rather than the 5% of GDP that was predicted two months ago.
Economists think that Russia’s relative success at navigating the crisis (the US economy is projected to fall by 5.7%, while EU economies are projected to fall by 9%) is due to the fact that in Russia, the share of sectors most affected by the coronavirus — paid services and small business — is smaller than in developed countries.
In addition, the Finance Ministry agreed to borrow money on the market more actively. According to Finance Minister Anton Siluanov, the federal government’s total debt will approach 20% of GDP. Building the debt up further is dangerous, he says: firstly, it will reduce the supply of money available on the market to private companies; and secondly, it will increase the share of the state budget that will have to be spent on servicing the debt, which, in turn, will negatively affect spending on other budget items.
Moreover, the government expects to receive additional revenues through “tax initiatives.” Siluanov didn’t specify if he was referring to the taxes on deposits and dividends withdrawn from foreign accounts proposed over the summer, or to some other levy.
At the same time, it seems like the money from the National Wealth Fund won’t be spent very actively — it will be saved for future government initiatives instead. But money will be “transferred” within the budget: for example the Finance Ministry didn’t abandon the idea of a freeze on indexing civil servants’ salaries, and it also decided to take money from some state programs, such as the “digitalization” of the economy, in order to spend it on more pressing aims during the crisis. It seems like there isn’t any talk of making cuts to the weapons program anymore.
It’s possible that cuts won’t be needed in 2022 either. According to the OPEC+ deal, Russia’s oil production quota is supposed to increase in several stages in
81 RUSSIA Country Report October 2020 www.intellinews.com
