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-November of 2006 in absolute terms was higher than the respective indicator of the relevant period of 2005 (RUR 4608.3 bln), some decline was registered in the relevant period with regard to GDP (24.16 per cent of GDP in 2005). The amount of federal budget expenditures throughout January-November 2006 has also grown in nominal terms in comparison with the relevant period of the year 2005 (RUR 2 966.7 billion); however, in relation to the share in GDP it demonstrated an explicit decline (by 15.55 per cent of GDP in 2005).
If we compare the dynamics of revenues and expenditures of the federal budget for the period under review and the third quarter of the current year, a lower level of revenues in GDP share should be noted (from 23.74 to 23.3 per cent) with a certain growth of expenditures (from 15.06 per cent до 15.2 per cent). Herewith, the decrease of the revenues and expenditures of the federal budget share in GDP is more significant in comparison with the data of the first and second quarter of the year 2006. As one can see from Table 1,revenues of the I and II quarters made 26.56 per cent и 24.87 per cent of GDP, expenditures - 15.71 per cent и 15.87 per cent of GDP accordingly.
Table 1.
Basic Parameters of the RF Federal Budget (per cent of GDP) Jn. - Nov. Jan. - Nov.
2004 2005 I Q. 2006 II Q. 2006 III Q. 2005 Revenues 20,4% 24,23% 24,16% 26,56% 24,87% 23,74% 23,20% Expenditures 16,1% 16,55% 15,55% 15,71% 15,87% 15,06% 15,21% Deficit (Ц)/ 4,4% 7,68% 8,6% 10,85% 9,00% 8,68% 8,0% Surplus (+) The revenues of the RF federal budget within October-November 2006 amounted to RUR 541.4, and RUR 559.8 bln, i.e. 20.54 per cent and 21.91 per cent of the monthly GDP. The expenditures of the consolidated budget have made RUR 329.9 bln (19.04 per cent of GDP) and RUR 344.1 bln (13.02 per cent of GDP) accordingly. The surplus of the federal budget made RUR 211.4 and 74.2 bln, which makes 8.02 and 2.87 per cent of GDP accordingly. Therefore, as of results of November, a growth of the federal budget revenues and expenditures can be noted versus the receding 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 considerably reduced. The structure of budget revenues for the period under review in presented in Table 2.
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. - Q II. Q III. Jan.-Nov 2005 Nov. Q I. 2006 2006 Taxes and other payments adminis12,62% 12.83% 13,74% 12,33% 11,69% 11.21% tered by the Federal Tax Service Taxes and other payments administered by the Federal Customs Ser- 9,96% 9.65% 11,51% 11,09% 10,77% 10.61% vice Receipts administered by the Federal Agency for Management of Federal 0,27% 0.27% 0,21% 0,21% 0,22% 0.26% Property Revenues of the federal budget ad1,38% 1.41% 1,10% 1,25% 1,06% 1.12% ministered by other federal structures Total revenues 24,23% 24.16% 26,56% 24,87% 23,74% 23.20% As one can see in the Table, in November of 2006 the structure of tax revenues as broken by individual sections did not practically change as in comparison with the data registered in 2005, as versus the first three quarters of 2006..However, in terms of GDP share, tax revenues and payments have decreased considerably.
Thus, the major share made for Federal Tax Service, was 11.21 per cent of GDP versus 12.83 per cent of GDP in November 2005. As opposed to that, revenues and payments to the federal budget, made by Federal Customs service made 10.61 per cent of GDP, having significantly overcome the relevant indicator of November of 2005 (by 9.65 per cent of GDP). The amount of revenues, administered by the Federal Agency for Federal property, has not changed in November of the current year in comparison with the relevant period of preceding year (0.27 per cent of GDP) and made 0.26 per cent of GDP. The amount of revenues of federal budget, administered by other federal authorities, in November of the current year has demonstrated some decline as opposed to the indicators o the preceding year (by 1.41 per cent of GDP) and made 1.12 per cent of GDP.
The dynamics of budget revenues within 2006 was variable. Thus, the Table shows the lowest level of taxes, administered by the Tax and Customs federal services in November, as compared with relevant indicators of the first three quarters of the current year. As opposed to that, a certain growth was observed in other indicators of the Table in terms of GDP share as compared with the preceding three quarters of the current year.
The estimated data of the RF Ministry if Finance on financing of the expenditures of the federal budget of 2005 - 2006 are presented in Table 3.
One can observe rather high volatility of the total financed expenditures within the period under review.
Thus, they made 17.11 per cent of GDP as of November of the current year against 18.18 per cent of 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.
Table 3.
Amounts of Financing of the RF Federal Budget Expenditures (% of GDP) Financing of Expenditures Jan. - Nov. Jan. - Nov.
2005 Q I. 2006 Q II. 2006 Q III 2005 Federal issues 2,64% 2.68% 2,96% 2,32% 2,31% 2.31% Including expenditures associated with the servicing of federal and 1,08% 1.20% 1,28% 0,75% 0,79% 0.70% municipal debt National defence 2,77% 3.03% 3,52% 3,03% 2,62% 2.69% National security and law enforce2,10% 2.32% 2,64% 2,31% 2,13% 2.21% ment National Economy 1,19% 1.22% 1,05% 1,22% 1,23% 1.26% Housing and public utilities 0,04% 0.04% 0,12% 0,20% 0,20% 0.19% Environmental protection 0,02% 0.02% 0,03% 0,03% 0,03% 0.03% Education 0,75% 0.82% 0,82% 0,95% 0,78% 0.83% Culture, cinematography and mass 0,23% 0.25% 0,22% 0,23% 0,21% 0.20% media Health care and sports 0,43% 0.47% 0,58% 0,59% 0,58% 0.58% Social policy 0,90% 0.98% 1,17% 0,95% 0,86% 0.87% Interbudgetary transfers 5,91% 6.36% 6,58% 6,28% 5,72% 5.94% Total expenditures 16,98% 18.19% 19,70% 18,10% 16,65% 17.11% Comparison of the structure of expenditures shows that in spite of the similarity of the structure of expenditures within January-November 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 2.68 per cent to 2.31 per cent of GDP, due to diminished payments for services of the government and municipal debts.
The interbudgetary transfers have been reduced from 6.36 per cent to 5.94 per cent of GDP, the expenditures for УNational economyФ - from 3.03 to 2.69 per cent of GDP. On the contrary, there was observed a growth of expenditures for УHousing and public utilitiesФ (from 0.04 per cent to 0.19 per cent of GDP), л Health care and sports (from 0.47 per cent to 0.58 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 several budget expenditure lines As per results of January-October 2006, revenues of the consolidated RF budget made 35.1 of GDP as compared with 35.9 for the relevant period of 2005. The expenditures of the federal budget have decreased versus the relevant indicator of 2005 and made 24.7 % of GDP (versus 26.1 per cent of GDP). The surplus of the federal budget in January-October 2006 made 10.4 per cent of GDP, somewhat higher than the indicator of 2005 (9.8 per cent).
Therefore, as of results of January-October of 2006, there was observed some decrease in the revenues of the RF consolidated budget, whereas an expressed decrease 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 39.0 per cent of GDP (as opposed to 39.7 per cent of GDP in January-September 2006), the expenditures made 27.9 per cent (28.6 per cent), whereas the surplus made 11.1 per cent of GDP, unchanged as per the preceding month.
As of December 1, 2006 the financial reserves of the RF Stabilization Fund made RUR 2 189.5 bln as opposed to RUR 1 894.09 billion of November 1 of the current year, what makes 8.2 per cent and 7.8 per cent of GDP respectfully in relation to the accumulated GDP within January-November of 2006 per annum.
Table 4.
Execution of the RF Consolidated Budget in January through October of 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% Expenses 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 Taxes* 48,8% 40,3% 40,3% 40,8% 38,8% 38,2% 37,6% 37,0% 36,0% 35,9% 35,8% 36,1% revenues 22,2% 23,3% 24,9% 27,1% 26,5% 26,6% 26,7% 26,6% 27,2% 26,1% 25,9% 28,1% Expenses 26,5% 17,0% 15,4% 13,7% 12,3% 11,6% 11,0% 10,5% 8,8% 9,8% 10,0% 7,9% Deficit/ Surplus I II III IV V VI VII VIII IX X XI XII Taxes 36,2% 34,4% 37,9% 37,1% 37,2% 36,8% 36,6% 36,5% 35,4% 35,1% Revenues 17,6% 21,0% 24,2% 25,4% 24,7% 25,5% 25,3% 25,1% 24,8% 24,7% Deficit/ 18,7% 13,4% 13,6% 11,7% 12,5% 11,3% 11,3% 11,4% 10,6% 10,4% Surplus *regardless Unified Social Tax Major developments in the budgetary sphere According to the opinion of A. Kudrin, the Ministry of finance, expressed in December, the assets of the stabilization fund can be started to be spend in three-four years. According to his words, in case of stabilization of the oil prices, there will be no problem with the excessive monetary offer in future. Moreover, the export surplus might come close to zero. However, according to Mr. Kudrin, the growth of the RF economy may demand an increase of the monetary offer and the assets of the RF stabilization fund can be involved in the economy. However, it concerns only the surplus value of the funds. It should be noted, that the surplus part of the stabilization fund shall be established in the amount of 7-10 per cent of GDP.
In mid-December the information was disclosed, that the RF Ministry of Finance has developed a draft law on favorable tax terms for innovation activities. The Minister of Finance has informed that the draft law is based on a reduced rate of the tax share in the value of the scientific and innovation product, creation of incentives for extension of the demand for research, for investments in scientific and innovation area, for development of small business innovation and research organizations. The draft law envisages, namely, a three-time enlargement of the established rates of expenses for research and development works, made to the RF fund of technological development, as well as to interbudgetary funds.
Minfin has also proposed to reject the annual approvals of the targeted financial programs and approve only new programs or amendments to the effective ones. According to Mr. Kudrin, there is no need to confirm the volumes of targeted financial programs every year. Rather than that, the targeted financial programs can be adopted once and confirmed regularly within the framework of a three-year financial planning. It makes sense to consider at the governmentТs meeting only new programs, as well as amendments thereto, if necessary, and adopt new measures of financial programs. Such order may reduce the volume of works under the financial programs by two thirds of the three-year financial plan. A. Kudrin has also offered to exclude regional and municipal objectsТ financing from the framework of targeted financing programs, having transferred those objects to the Fund of Regional Development. Commenting the indicators of the federal budget of 2007, the Minister of Finance has noted, that the expenditures of the budget will not be reduced, in case the prices for the Russian oil would not get lower than USD 61 per barrel. It has also been pointed out, that if the price gets lower than the above level, it will affect the deductions to the stabilization fund. As per the estimates of the RF Minfin, the volume of that fund should make RUR 4.2 Trillion by the end of 2007.
The Minister has also noted, that the Fund should be enlarged in favorable years, but spent gradually in case of necessity, to sustain the level of social liabilities. The Minister has stressed out, that it is necessary to determine the way to spend the assets of the Stabilization Fund. If it is done in quick rates, the future generations will have to raise taxes within 15-20 years.
Besides, A. Kudrin assured, that the budget for 2008-2010 will be approved in the first days of July, 2007.
According to his words, the schedule of the budget development is presented to the Government. Minfin is expects to complete the works on the budget and present it to the State Duma by April 30, 2007. According to the new Budget Code, the budget will be approved by three, rather than four readings, so in the first days of July the budget can be approved.
Besides, A.Kudrin has noticed, that currently there is a balance of over RUR 400 bln on the accounts of the RF Subjects. A part of those assets will be spent out, but the Minister noted, that by the end of 2006 unplanned revenues of the RF subjects will exceed RUR 530 bln. It is explained, by his words, by the additional potential of the economy to raise revenues, which allowed to address about RUR 251 bln from the federal to the SubjectsТ budgets.
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