Anti-crisis spending growth
Federal spending in 2020 against the backdrop of the pandemic crisis will increase from the planned budget law of 19.7 trillion rubles. to over 23 trillion rubles., said the deputy head of the Ministry of Finance. “If we all calculate together, together with the transferred costs of last year [порядка 960 млрд руб.] and the anti-crisis package, it is more than 23 trillion rubles, ”he said.
Fitch predicts easing budget rule in Russia
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In general, the anti-crisis package is about 4 trillion rubles. direct additional budget costs, said Kolychev.
The growth of net domestic borrowing to 4 trillion rubles. and an increase in budget expenditures to 23 trillion rubles. this year – new information: before that, it was estimated that costs would amount to about 22 trillion rubles. (This is reflected in the current consolidated budget list). Kolychev admitted that, as in previous years, part of the approved costs may not be used. “But we, of course, are setting up all departments to ensure that it is precisely this year, when private demand is sagging, that demand from the state (especially what is approved by the budget) is best used to the fullest extent to support the economy,” he emphasized.
Temporary deviation from the budget rule
Kolychev confirmed that in 2020–2021 the authorities will temporarily deviate from the budget rule in terms of determining marginal costs, but neither the cutoff price nor other parameters of the budget rule will be changed in any way. In 2020, expenses in excess of what the budget rule prescribes will amount to about 2.2–2.3 trillion rubles. (equivalent to the amount of additional net borrowing). This follows from the rule for determining marginal budget expenditures. In 2021, despite the expected decrease in non-oil and gas revenues, it is proposed to establish budget expenditures at the same level that was recorded in the March amendments to the 2020 budget (19.7 trillion rubles), this proposal was included in the draft national plan for economic recovery submitted in early June. Kolychev said that this proposal is being discussed.
The Deputy Minister of Finance also said that for 2021 the Ministry of Finance is discussing the possibility of adjusting the budget rule in terms of determining basic oil and gas revenues (the total budget expenditures depend on them and on the amount of non-oil and gas revenues). It is about determining basic oil and gas revenues based on the forecasted level of hydrocarbon production and export before the OPEC + deal to reduce production. This would allow us not to reduce basic oil and gas revenues following a sharp reduction in actual production. “Naturally, if such a decision is made, it will be an interim decision for 2021. <...> – if we are talking about a temporary reduction in production. If, for some reason, production volumes become at a lower structural level, then, of course, the budget and the entire economy should be adjusted to this, ”Kolychev explained.
The Fitch Ratings warned that the Ministry of Finance would temporarily weaken the budget rule in terms of total budget expenditures (other parameters of the budget rule – cut-off price and rules for using the NWF – will not be affected).
Kolychev emphasized that a deviation from the budget rule would be temporary — it is a countercyclical budget policy during a cyclical economic downturn; since 2022, the Ministry of Finance will return to normal.