The State of the Federal Budget According to the tentative estimates the federal budget execution on cash basis, made by the RF Ministry of Finance, the federal budget was executed in terms of revenue in the amount of RUR 5 092.2 billion (23.35 per cent of GDP), in terms of expenditures - in the amount of RUR 2 887.billion (15.12per cent of GDP). The budget surplus made RUR 1 663.4 billion (13.82 per cent of GDP). The dynamics of the basic parameters of the RF federal budget within 2004-2006 is presented in Table 1. It should be noted that regardless that the amount of revenues of the federal budget within January-October of 2006 in absolute terms was higher than the respective indicator of the relevant period of 2005 (RUR 4148.9 billion), some decline was registered in the relevant period with regard to GDP (24.24 per cent of GDP in 2005).
The amount of federal budget expenditures throughout January-October 2006 has also grown in nominal terms in comparison with the relevant period of the year 2005 (RUR 2 714.3 billion); however, in relation to the share in GDP it demonstrated an explicit decline (by 15.86 per cent of GDP in 2005). Similar conclusions can be made as a result of comparison of the period under review and the relevant period of 2005.
As to comparison with the data of the first three quarters of the current year, one should note a trend to a decline of revenues and expenditures share in GDP.
The revenues of the RF federal budget within September and October 2006 amounted to RUR 528.and RUR 541.5, i.e. 20.15 per cent and 20.5 per cent of the monthly GDP respectively. The expenditures of the consolidated budget have made RUR 332.2 bln (12.6 per cent of GDP) and RUR 344.bln (13.02 per cent of GDP) accordingly. Therefore, as of results of October, a growth of the federal budget revenues and expenditures can be noted versus the preceding month in absolute terms and in regard to monthly GDP value as well. Nevertheless, the federal budget surplus value in nominal terms and in relation to GDP has remained practically unchanged.
For the structure of revenues over the period under observation, see Table 2.
Table 1.
Basic Parameters of the RF Federal Budget (per cent of GDP) Jn. - Oct. Jan. - Oct.
2004 2005 I кв. 2006 II кв. 2006 III кв. 2005 Revenues 20,4% 24,23% 24,24% 26,56% 24,87% 23,74% 23,35% Expenditures 16,1% 16,55% 15,86% 15,71% 15,87% 15,06% 14,82% Deficit (Ц)/ 4,4% 7,68% 8,38% 10,85% 9,00% 8,68% 8,53% Surplus (+) Table 2.
Amounts of Revenues to the RF Federal Budget (per cent of GDP in terms of cash basis execution) Execution on Cash basis Jan. - I Quarter II Quar- III Quar- Quarter Oct. 2005 2006 ter 2006 ter 2006 Taxes and other payments adminis12,62 % 13,05 % 13,74% 12,33% 11,69% 11,43% tered by the Federal Tax Service Taxes and other payments administered by the Federal Customs Ser- 9,96% 9,44% 11,51% 11,09% 10,77% 10,66% vice Receipts administered by the Federal Agency for Management of Federal 0,27% 0,27% 0,21% 0,21% 0,22% 0,21% Property Revenues of the federal budget ad1,38% 1,48% 1,10% 1,25% 1,06% 1,05% ministered by other federal structures Total revenues 24,23% 24,24% 26,56% 24,87% 23,74% 23,35% As one can see in the Table, in September of 2006 the structure of tax revenues as broken by individual sections did not practically change in comparison with the data registered in 2005.
Thus, the bulk of the tax revenues was associated with the taxes and other payments administered by the RF Federal Tax Service, their share in GDP made 11.43 per cent, as compared with 13.05 per cent of GDP registered in October of 2005. Therefore, one should state a considerable decrease of this indicator of the current year. As opposed to that, revenues administered by the RF Federal Customs Service were considerably higher than the respective indicators observed in September (9.44 per cent of GDP). The amount of revenues administered by the Federal Agency for Property Management in October of the current year have been somewhat lower than the relevant indicators of the preceding year (0.27 per cent of GDP). Revenues of the federal budget, administered by other federal bodies, have also demonstrated a considerable downgrading in October of the current year as compared with the relevant indicators of the preceding year (by 1.48 per cent of GDP).
The dynamics of taxes and revenues varied within 2006 as well. Thus, the Table given below shows, that a decrease of tax revenues, administered by the Federal Tax Service, was observed since the beginning of 2006 (from 13.74 per cent in the I quarter to 11.43 per cent in October) and FTS (from 11.51 per cent in the I quarter to 10.66 per cent of GDP in October), whereas there were no significant changes in other indicators.
For the preliminary data on the financing of the expenditures borne by the RF federal budget in January through September of 2005 and 2006 presented by the RF Ministry of Finance, see Table 3.
One can observe rather high volatility of the total financed expenditures within the period under review. Thus, they made 18.56 per cent of GDP as of October of the current year against 19.0 per cent of GDP in the relevant period of 2005. As opposed to that, the fluctuations of that indicator within the first three periods of the current year were relatively high: the share of quarterly expenditures varied within the range of 16.65 per cent to 19.7 per cent of GDP.
Tableа 3.
Amounts of Financing of the RF Federal Budget Expenditures (% of GDP) Financing of Expenditures Jan. - I Quarter II Quarter III Quarter Jan.ЦOct.
Oct.2005 2006 2006 2006 Federal issues 2,64% 2,90% 2,96% 2,32% 2,31% 2,53% Including expenditures associated with the servicing of federal and 1,08% 1,33% 1,28% 0,75% 0,79% 0,84% municipal debt National defense 2,77% 2,93% 3,52% 3,03% 2,62% 2,97% National security and law enforce2,10% 2,40% 2,64% 2,31% 2,13% 2,35% ment National Economy 1,19% 1,20% 1,05% 1,22% 1,23% 1,32% Housing and public utilities 0,04% 0,03% 0,12% 0,20% 0,20% 0,21% Environmental protection 0,02% 0,03% 0,03% 0,03% 0,03% 0,03% Education 0,75% 0,88% 0,82% 0,95% 0,78% 0,82% Culture, cinematography and mass 0,23% 0,24% 0,22% 0,23% 0,21% 0,22% media Health care and sports 0,43% 0,48% 0,58% 0,59% 0,58% 0,64% Social policy 0,90% 1,01% 1,17% 0,95% 0,86% 0,94% Interbudgetary transfers 5,91% 6,91% 6,58% 6,28% 5,72% 6,53% Total expenditures 16,98% 19,00% 19,70% 18,10% 16,65% 18,56% Table 3.
Execution of the RF Consolidated Budget in January through September of (in per cent of GDP) I II III IV V VI VII VIII IX X XI XII Taxes* 25,6% 24,4% 25,6% 27,4% 27,1% 26,0% 26,1% 25,7% 25,0% 25,0% 25,1% 25,2% Revenues 32,0% 30,3% 31,5% 33,4% 33,6% 32,2% 32,2% 31,6% 30,9% 30,8% 30,7% 31,1% Expenditures 20,7% 25,3% 27,7% 28,8% 28,8% 28,6% 28,7% 28,5% 28,2% 27,8% 27,9% 29,7% Deficit/ 11,3% 5,0% 3,8% 4,5% 4,7% 3,5% 3,6% 3,1% 2,7% 3,0% 2,8% 1,4% Surplus I II III IV V VI VII VIII IX X XI XII Taxes* 6,1% 21,8% 27,4% 27,4% 26,6% 27,2% 27,1% 26,4% 26.5% 26.9% 26,8% Revenues 30,6% 28,2% 29,8% 32,9% 32,9% 32,5% 33,1% 32,9% 31,9% 32.0% 32.3% 32,3% Expenditures 18,5% 22,8% 25,4% 27,3% 26,9% 27,0% 27,0% 26,9% 26,0% 25.9% 26.1% 27,8% Deficit/ 12,1% 5,4% 4,4% 5,6% 6,0% 5,5% 6,1% 6,0% 5,9% 6.1% 6.2% 4,5% Surplus I II III IV V VI VII VIII IX X XI XII Revenues 48,8% 40,3% 40,3% 40,8% 38,8% 38,2% 37,6% 37,0% 36,0% 35,9% 35,8% 36,1% Expenditures 22,2% 23,3% 24,9% 27,1% 26,5% 26,6% 26,7% 26,6% 27,2% 26,1% 25,9% 28,1% Deficit/ 10,0% 26,5% 17,0% 15,4% 13,7% 12,3% 11,6% 11,0% 10,5% 8,8% 9,8% 7,9% Surplus I II III IV V VI VII VIII IX X XI XII Revenues 36,2% 34,4% 37,9% 37,1% 37,2% 36,8% 36,6% 36,5% 35,4% Expenditures 17,6% 21,0% 24,2% 25,4% 24,7% 25,5% 25,3% 25,1% 24,8% Deficit/ 18,7% 13,4% 13,6% 11,7% 12,5% 11,3% 11,3% 11,4% 10,6% Surplus *regardless Unified Social Tax Comparison of the structure of expenditures shows that in spite of the similarity of the structure of expenditures within January-October of 2005 and 2006, noticeable differences were observed in some expenditure lines. For instance, the УShare of expenditures for federal issuesФ has been decreased from 2.9 per cent to 2.53 per cent of GDP as well as Interbudgetary transfers, diminished from 6.91 per cent to 6.53 per cent of GDP in the current year. As opposed to that, there was observed a growth in a number of expenditure lines, namely in УNational economyФ (from 1.2 per cent to 1.32 per cent of GDP), УHealth care and sportsФ (from 0.48 per cent to 0.64 per cent of GDP). As concerns other largest expenditure items, the differences were less significant. Comparison of other quarterly data shows also significant differences in a number of the budget expenditure lines As of the results of January-September of 2006, the revenues of the RF consolidated budget made 35.4 per cent of GDP as compared with 36.0 per cent of GDP, registered in the respective period of 2005.
The expenditures of the consolidated budget have also been reduced as compared with the respective indicator of 2005 and made 24.8 per cent of GDP (against 27.2 per cent of GDP). The surplus of consolidated budget in January-September 2006 made 10.6 per cent of GDP, what is explicitly higher than the 2005 indicator (8.8 per cent).
Therefore, as of results of January-September of 2006, there was observed some decrease in the revenues of the RF consolidated budget, whereas an expressed downfall was noticed in the expenditures of consolidated budget in terms of their share in GDP in comparison with the respective figures of 2005, what caused some growth of the surplus of the consolidated budget. Moreover, in November the RF Ministry of Finance has published the data of the RF enlarged government on the budget execution in January through September of 2006. In accordance with the presented indicators, the amount of revenues made 39.7 per cent of GDP, the expenditures made 28.6 per cent, whereas the surplus made 11.1 per cent of GDP.
As of November 1, 2006 the financial reserves of the RF Stabilization Fund made RUR 1 894.billion as opposed to RUR 1 730.6 billion as of September 1 of the current year, what makes 7.8 per cent and 7.4 per cent of GDP respectfully in relation to the accumulated GDP within January-October of 2006 per annum.
Major developments in the budgetary sphere On Friday, November 8 the State Duma has adopted in the third reading the draft of the federal budget for 2007, including the amendments. There were agreed all the procedures, related to national projects. According to the opinion of Mr. A. Kudrin, the Minister of Finance, the budget is actually adopted, as the fourth reading has a purely technical character. Making comments on tentative terms of adoption of the federal budget for the year of 2008, the Minister noted that it can be approved in the first days of July 2007. Moreover, the State Duma has approved in the first reading the amendments of parameters of the current year budget. Thus, budget expenditures were increased by RUR 160.9 bln, RUR, including 33 bln of expenditures, not performed within the year of 2005; RUR 42 bln with the support of the federal subjects and national projects. According to the Minister, extra expenditures made only RUR 85.5 bln and the largest portion of them is designated for the support of the Ministry of Defense in terms of lubricants acquisition and housing construction. A. Serdyukov, the Head of the Federal Tax Service, gave his comments on the issues of tax control in November. According to his words, desk audits will no longer be the major form of tax control since 2007 due to the new amendments to the Tax Code, coming into force as o f January 1, 2007. The Head of the Federal Tax Service has also noted, that the Tax Service is intended to introduce a unified system of tax audit planning, easy for understanding of the taxpayers and tax authorities. Analytical component of tax audit should play a greater role, i.e., the review of taxpayers cases will point to those, who have to be audited in the first turn. In his comments MR. A. Serdyukov noted, that the tax burden make about 27.4 per cent of GDP as compared to previous figure of 33.6 per cent of GDP.
Minfin has stated in November, that before December 1 there will be prepared a concept of the Fund of the Future Generations. According to the Minister of Finance, the Ministry is completing the work on the Russian strategic model for the utilization of oil and gas resources in the framework of the concept of the Fund of the Future Generations. The Fund is supposed to consist of two portions, which will be allocated in securities under different investment programs. Those programs will make the difference of the Stabilization Fund portions, one of which could be addressed to the oil price control, while the other portion should be invested in a highly diversified portfolio of securities. As concerns the list of assets available to investors, the Ministry of Finance is planning to extend it and allocate the Fund assets, exceeding the reserve portion, in less conservative assets. It should be reminded, that currently the Fund assets are invested only in the securities of industrially developed countries with the highest credit ratings according to the major rating agencies.
D. Polevoy Monetary and Credit Policy As of results of October of the current year consumer prices have grown in the RF by 0.3 per cent in average terms within the country. It means that the growth rate of consumer prices has decreased twice as compared with the relevant period of the preceding year. The volume of gold and foreign currency reserves in November has reached its historical peak of USD 278.9 bln., while in October the monetary base in broad definition has been reduced by 3.5 per cent.
Consumer price index in October made 0.3 per cent (versus 0.6 per cent in October 2005; see Fig.
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