Unbalanced budget would pose more danger to economy than sanctions - Siluanov
MOSCOW. Oct 25 (Interfax) - An unbalanced federal budget would pose more danger to the Russian economy than external sanctions, Finance Minister Anton Siluanov said.
"Experts argue like this - let's increase [budget] spending, we'll finance everything and everything will be fine. But that's not the case," Siluanov said the at a meeting with the Just Russia parliamentary faction ahead of the 2023 -2025 draft budget's first reading.
According to the draft, the budget deficit in 2023 will be 2% of GDP - the official forecast for the current year is 0.9% of GDP, but the Finance Ministry said it will be higher. The deficit will begin to narrow in 2024, to 1.4% of GDP, and in 2025 it will be 0.7% of GDP.
"The draft budget is special, complex, due to the fact that in the current conditions we have a lower revenue base dynamics than planned. On the other hand, we see a need to find resources for the new tasks that our country faces - both the development of new territories, and financial support for our security tasks. Therefore, when budgeting, the main logic was to find resources for new goals, and on the other hand, to continue all areas of development which the president has set down in his speeches and decrees. The next logic was to back all social obligations and new decisions that were announced this year, including in the presidential address, with financial resources. And to ensure the budget does not unbalance the financial system," Siluanov said, describing the Finance Ministry's approaches when working on the draft three-year budget.
He said that when drafting the budget, a "very detailed, balanced" assessment of the possible volumes of expenditures was carried out with the involvement of the Central Bank. "Yes, we have money supply that is maybe not as high, just like the money multiplier, compared with other countries. But if we allow any slack here, then everything will spiral into inflation. Inflation will eat away incomes and debase all our decisions on new spending, and we will get the opposite effect. So the logic of fiscal policy for the next three years is balancing the budget quantitatively by 2025. That is, revenues will be equal to expenditures excluding debt servicing costs. This is a good sustainable fiscal framework," Siluanov said.
"If we hadn't done this, it would be easy to destabilize us from inside, and that would be worse than any sanctions that are imposed on us from the outside," he said.
"New tasks that require additional resources" are fully reflected in the budget in agreement with the Defense Ministry and other security agencies. "And resources for regional development and restoration are included in the budget. A significant amount of this funding is taken into account this year as well, because this year funds are also being used to expand military-technical production facilities. And this year, significant resources are also being allocated for the restoration of territories, destroyed infrastructure. This work starts not next year, it is in full swing this year," Siluanov said.
The minister also mentioned prioritization in the structure of expenditures and their optimization by 10% when the budget was being drafted. "Yes, we have optimized some expenses, with the exception of public regulatory obligations, by 10%. It was not easy in the framework of our work with ministries and departments, and now deputies are asking why the optimization was carried out. The optimization was carried out to find new resources for new tasks of technological development and new tasks that are related to the goals that have been set this year," he said.
Commenting on the lack of growth of budget expenditures in absolute terms in the three-year period - they will remain almost at this year's level of 29.056 trillion rubles or 19.4% of GDP in 2023, 29.433 trillion rubles or 18.4% of GDP in 2024 and 29.244 trillion rubles or 17.1% of GDP in 2025 - Siluanov said this level of spending was "higher than the budget's normal level." "We are financing these expenses with a significant budget deficit, and, of course, it is not easy to maintain such expenses. And expenditure needs to be financed and supported in conditions when the revenue base is not growing at such a pace amid changing dynamics of macroeconomic indicators, not the pace that was originally planned. Therefore, the logic is this - we are maintaining the 29 trillion rubles, which have gone beyond the normal level this year, for the whole period of three years, and in 2025 we will achieve normal budget equalization with the same 29 trillion rubles," Siluanov said. After 2025, "this volume will grow and new obligations and new expenses will grow due to new budget parameters," he said.