ALEXEI VEDEV ON WHAT THERE IS ENOUGH MONEY FOR IN THE 2024 BUDGET

–   A new draft of the Federal Budget is now being intensively discussed. What is a budget from a political and economic point of view?

– A budget is money that is collected in the form of taxes and redistributed by the state in the form of expenditures. The budget has a number of tasks, but the main one is to fulfill what is called the social contract (social contract is an informal agreement between society and political-economic decision-makers on the principles of organizing life in the country).

– The draft of the new budget is a deficit one again. Over the past 15 years, there have been fewer surplus budgets than deficit budgets. Is this a good thing, or a bad one?

– More often than not, the surplus budget is a bad thing. Surplus is bad because the government takes more money from the economy than it gives. Thus, the surplus budget has a disincentive character.

– So the budget deficit is better than surplus?

– In all countries, the deficit budget is considered either good or acceptable. I have always opposed the surplus budget in Russia. There is a deficit for spending, which is financed by various sources, ranging from printing money, creation of money, to borrowing on the financial market. The deficit draft of the new budget is good.

– How should we deal with the deficit? In your opinion, should we impose new taxes or borrow on the financial market?

– It depends on short-term conditions. I would use the National Welfare Fund (NWF) right now. New taxes kill or slow down economic growth. And borrowing is now quite expensive by virtue of the increase in the key rate. Placing federal loan bonds at 12% is a lot. About 5-7% of all expenditures go to servicing domestic debt. This is also a lot. Therefore, I would treat it very conservatively and carefully. But if the key rate and interest rates in general are reduced, the domestic debt market can be developed.

– You said that the budget has a social contract function. What kind of social contract do we have now? Does the 2024 budget correspond to it?

– Yes, certainly, corresponds. 

– Has this contract changed in the last 30 years?

– It changed structurally depending on the economic situation. For example, if oil costs $120-130 per barrel, the state has a lot of money, which gives the opportunity for maneuver. And another situation when in the mid-90s oil was at $12-14 per barrel. This led to a large budget deficit and then to the budget crisis of 1998.

– And what development thrust of the state economic policy would you name for the last 15-20 years?

– I would call it a trend that due to various reasons the share of the state in the economy is going up. If 15-17 years ago we had a private economy, now the state dominates in many sectors. From the banking system to the oil industry. On the other hand, a number of industries got off to a great start and are developing on their own. Agriculture, light and food industries are demonstrating growth. These sectors only need clear rules of the game, but they do not require state support. And I think there will be more and more such sectors.