Russia's Finance Ministry has published its budget policy outline for 2011-2013, the Kommersant business daily reported on Friday.
In order to cut the budget deficit to 3 percent of the consolidated budget by 2013, the ministry proposes a growth in national debt, but local and regional debts will be limited. In return, it proposes to create local stabilization funds and increase privatization. An example to the regions is the federal center that was demonstrated already in 2010, with ships and ports being sold off.
The economic parameters of Finance Ministry Budget Policy Guidelines for 2011-2013 are based on its June macroeconomic forecast. It will be assessed in September taking into account changes in industrial output and consumer prices.
"According to the ministry, if the Russian economy grows at 4 percent in the next ten years, and the federal budget deficit is maintained at around 3 percent, then by 2020 the state debt will reach 33 percent of GDP as against the current 10 percent. In this case, federal budget spending will grow to 3-4 percent of GDP at borrowing rates of 6-8 percent," Kommersant quoted Finance Minister Alexei Kudrin as saying.
According to Kommersant, the main source of the federal budget deficit reduction will be domestic state bonds. The draft budget already contains earnings from privatization - 298 billion rubles (almost $10 billion) in 2011, 276 billion in 2012 and 309 billion in 2013. The government will decide on a privatization list for 2011-13 only in September.
However, "big privatization" has to begin on a trial basis already this year. According to one source, First Deputy Prime Minister Igor Shuvalov has agreed to a proposal from the Finance Ministry to broaden its privatization plan for 2010 - it will contain an additional 26 state stakes in infrastructure shareholding companies. The office of the first deputy PM confirms this information, explaining that an extension of the list is part of the aim of reducing the participation of the state in the infrastructural sectors of the economy, attracting investment into the sector and last but not least reducing the budget deficit.
These aims had been previously cited by Prime Minister Vladimir Putin. According to a source, the main assets on the list are the Novorossiisk and Murmansk sea ports, a Moscow river port, Volga and Sakhalin shipping companies. The main part of the assets will be sold in auctions and some will be bought by investment banks. The source did not state the sum the state expects to receive from the sale, but in June the Finance Ministry estimated it to be 30-70 bilion rubles. The "list of 26" should be confirmed by Putin in August or September.
The regions will also not avoid privatization in the Finance Ministry's plan. From 2010 to 2013 earnings of the consolidated budgets of Russia's regions will shrink from 13 percent of GDP to 11.3 percent, and expenditure from 13.7 percent of GDP to 11.4 percent. The deficit of the consolidated regional budgets should fall from 0.7 percent of GDP in 2010 to 0.1 percent of GDP in 2013. The federal center will not refuse to support the regions and local budgets, but Kudrin's team is worried by the growth in regional debt, which in 2009 alone grew by 48 percent to 890.5 billion rubles, and at the municipal level by 27 percent to 134.9 billion.
The Finance Ministry is proposing that Russian regions with high debt burdens conclude an agreement with it to a regional debt policy settlement, which suggests that the amount of regional and local debt should fall from 973.4 billion rubles at the start of 2011 to 480.1 billion by 2014.
The main new element in the Finance Ministry's plan to strengthen regional budgets is the creation of a "reserve fund for regions of the Russian Federation." The mechanism for its formation and financing has not been disclosed. The ministry says the incentive for their creation should be a ban on "placing budget funds in bank deposits." A region will be obliged to use money from its reserve fund to cover a deficit of more than 10 percent of its revenues, excluding federal subsidies and funds from privatization of regional property. This directly encourages the regions towards mass privatization from 2011.
MOSCOW, August 6 (RIA Novosti)
