A Few Words about the Recently Published Laws on the Federal Budget

As previously, both laws were published in the form of unidentified PDF files, which makes their analysis considerably difficult. For the first time in a number of years, the volume of the unclassified part of the budget for the next year and the planning period is smaller than that of its predecessor. By comparison with the previous federal budget law, the unclassified part of the budget has become shorter by 38 pages, being reduced to 4,251 pages plus annexes. Unfortunately, this has apparently happened owing to an increase in the volume of secret and top secret annexes: over the course of the two months when the draft law was being considered by the Federal Assembly, the classified expenditures of the federal budget for 2013 rose by 6.6% - fr om Rb 1.775 trillion to Rb 1.895 trillion, or from 13.3% to 14.1% of total expenditures. It should be noted that the rise in the secret and top secret expenditures of the federal budget for 2013 will amount to Rb 373bn (24.6%).

It is noteworthy that the federal budget for the current year has displayed an opposite trend: by comparison with the first version of the federal budget law (No 371-FZ), in its latest version (No 247-FZ) secret and top secret expenditures have dropped by 1.8% or Rb 28bn, while their share in total expenditures has declined from 12.2% to 11.7%.

Judging by the Federation Council Defense and Security Committee's report No 3.3-04/1846 of 5 June 2012, the current federal budget's expenditures under the ‘National Defense' federal budget function have remained at the level established by Federal Law No 48-FZ of 5 June 2012 - Rb 1.8221 trillion (or 3.05% of GDP), while the Rb 53.220bn-rise in the RF Ministry of Defense' unclassified expenditures introduced in pursuance of Federal Law No 247-FZ has taken place at the expense of some other expenditures, including classified expenditures that are usually associated with the State Defense Order. This gives rise to a number of questions, for example this one: can it really be possible to effectively use, in the few remaining days before the end of the year, the Rb 67.319bn additionally allocated for the provision of housing to military personnel? Even more surprising is the continuing rise in the RF Ministry of Finance's reserve funds under the unclassified expenditure items of the ‘National Defense' federal budget function. At the very end of the year, they rose by Rb 15.710bn. Thus, over the course of the year, these expenditures have increased five-fold - from Rb 6.600bn to Rb 32.536bn.

 

In 2013, according to the Federation Council Defense and Security Committee's report No 3.3-04/1847 of 27 November 2012, expenditures under the ‘National Defense' federal budget function will go up by 14.8% - to Rb 2,141, 205.5m (or 3.22% of GDP). Although the total amount of the RF Ministry of Defense's expenditures financed from the federal budget has not been published, their amount can be approximately estimated by adding the amount of the published part of expenditures under the ‘National Defense' federal budget function (Rb 1.363bn) to the classified part of these expenditures (Rb 1.134 trillion). The resulting sum is approximately Rb 2.5 trillion, which represents the full amount of expenditures on the formation of the RF Ministry of Defense's consolidated budget. Apparently, there is no point in carrying out more precise estimates that will involve the deduction of the expenditures on the nuclear weapons complex, on economic mobilization preparedness, etc., incurred by other ministries and departments, and the addition of the RF Ministry of Defense's classified expenditures under the federal budget functions ‘Nationwide Issues', ‘Housing and Utilities Sector', ‘Education', ‘Culture and Cinematography', ‘Healthcare', ‘Social Policy', ‘Physical Culture and Sport', and ‘Mass Media'.

 

These new developments in the budgetary field definitely add incongruity to Prime Minister Dmitry Medvedev's statement made in his interview on 7 December 2012, wh ere he spoke about the RF Ministry of Defense's expenditures being comparable with those of the consolidated education and healthcare budget. This statement has already been subject to some well-deserved criticism. It is quite possible that one of the Prime Minister's assistants who were assigned the task of preparing the reference materials for him, in addition to mistaking the distribution of budget expenditures among ministries for their functional distribution, had no access to the secret and top secret part of the RF Ministry of Defense's budget expenditures, or was simply denied permission to publish any specific data. Whatever the reason for his failure, the end result would have been the same anyway.

Most unfortunately, since the autumn of 2007, errors in understanding, transmission and use of budget information caused by its unjustified classification have become widespread among Russian politicians, economists and journalists. In due course, these errors began to appear also in newspapers and journals (the author has spotted more than 10 errors in autumn 2012 publications alone) and then found their way into some textbooks scenarios of economic development. And now, judging by the afore-mentioned interview on 7 December, they have somehow spread into the highest level of Russia's government. And it is not unlikely that, by comparison with the destructive effect of such errors, even the notorious miscalculations made in the course of the Russian pension reform of the early 2000s may appear quite insignificant.

V.B. Zatsepin - Candidate of Military Sciences, Head of the Economics of the Military-Industrial Sector Department