Most of the President's Budgetary Statement Ideas are Targeted Towards 2018

The main problems of the budgetary policy are inherited from the previous 12 years of Putin’s rule. All those problems are well-known, and they have been debated by experts for many years while this budgetary address is not targeted on eliminating them. interview with Sergey Aleksashenko, director of macroeconomic research at the Higher School of Economics - National research university (HSE).

Could you comment on the president's budgetary address to the Federal Assembly?

This budgetary address was quite surprising for me, because the main problems of the budgetary policy, which have been indicated at the very beginning, are, inherited from the previous 12 years of Putin’s rule. And it was strange to hear the president discussing problems that are results of his decisions taken 5 -7-8 years ago, like the non-oil deficit, lack of transparency and so on and so forth. All those problems are well-known, and they have been debated by experts for many years while this budgetary address is not targeted on eliminating them.

If you compare the list of main problems and the set of main targets indicated in the second part of the Address, in fact, there is no big correspondence. And that surprises me, because, on the one hand, no one can disagree with the problems, and definitely the president is quite correct in indicating the main weaknesses of the Russian budgetary system. But on the other hand, he does not propose how to solve these problems, he does not take any responsibility, because the whole system, with the non-oil deficit, with its lack of transparency, with the major dependence of regional budgets on federal money, has emerged during his time, since the year 2000.

Moreover as we look at the set of main targets, eventually there are none related to the coming years, to 2013 or even 2014, the biggest part of his ideas are targeted towards 2018 or maybe even further on. And my question in this respect is, why should I trust that all his ideas will be implemented, if you do not propose to eliminate weaknesses indicated by yourself?

The president proposed not to increase the tax burden on the non-raw material sector of the economy "at least until 2018." Do you think this promise will be kept?

The idea is not to increase the tax pressure on the non resources’ sector, but at the same time we have to understand that several decisions have been made that are increasing tax pressure on the households - different excises for gasoline, tobacco, alcohol are scheduled to increase in the next three years; property tax should be implemented shortly and, seems, will be higher than taxes it will replace. All that means that ordinary households will have to pay more, while the real sector, the non-resource-driven real sector will soon feel the pressure for higher wages.

How would you assess the need that the president expressed to create a Russian financial agency and to insure the Russian budget against sharp fluctuations in energy prices?

I fully support the idea to use the floating oil price for budgetary projections, because definitely stabilization of the revenue base of the budget and understanding of how the oil reserves can be used is good for the stability of the budget. But on the other hand, I have to remind that we had the similar budgetary construction before the crisis of 2008, and the very first decision implemented by the government was to cancel that budgetary rule. So the question is not whether we need these new budgetary rules or not. The question is whether the government is able to keep itself within the parameters of these tight rules and in the coming years, and moreover when next crisis occurs.

As for the Russian financial agency, there are countries that have similar agencies to manage state debt and state reserves, and there are countries that do not use these types of agencies. So it's not that important, and in fact it's not an essential institutional change. If the government believes it's easier, then they may do it, but there are countries that live rather well without such agencies.

The president talked about the necessity "to ensure greater transparency and openness in the budget and the budgetary process to the public," and he proposed creating a common portal for Russia's budget system. He emphasized that it should be accessible to the public. In what way an ordinary Russian citizen could participate in managing the budgetary process? What international experience exists in this area?

First of all, there are not so many ordinary people interested in managing the budget and controlling budgetary expenditures. Usually, in bulk of countries, that is the responsibility of the parliament. And that's why there is a rather vague hope that any ideas of the president will lead to a positive result if there were falsified elections and the parliament is non-legitimate in the eyes of many citizens. Being not elected honestly current members of the parliament are not interested in controlling the government because de facto they have been nominated to the parliament by the government. In such a situation any attempts of experts or of NGOs to influence or control the budgetary process will be of no use.

We have an example of India, where it was possible to involve ordinary people to control budgetary expenditures when the government created a system that delivered information on agricultural subsidies to every particular village. And suddenly citizens of the village found that there were some people that had left the village many years ago but they were still recipients of those subsidies.

If the Russian government is able to create such a system, where each ruble of the expenditures is visible - who receives money from the budget, and why, - that may help. But I am skeptical about this desire of the government.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.