Draft of Main Directions of the budget policy for 2016-2018 is released

The draft envisages general reduction of revenues and expenditure of the budgets of the budgetary system versus the GDP. At the same time, expenditure against GDP will be cut

along all sections of the functional classification of budget expenditure minus environmental protection, culture, physical culture and public debt servicing.

Expenditure of the budgets will fall from 40.8% of GDP in the current year to 34.3% of GDP in 2018, in other words by 6.5 percentage points. Most expenditure reduction is planned along sections: 'Social policy' by 1.9 p.p. (from 14.6% in 2015 down to 12.7% of GDP in 2018), 'National economy' by 1.3 p.p. (from 5.2% down to 3.9% of GDP), 'National defense' by 1.2 p.p. (from 4.3% down to 3.1% of GDP), 'National security and law enforcement activity' by 1.1 p.p. (from 3.0% down to 1.9% of GDP).

The policy expressed in this reduction does not fully implement the known scheme of 'budget maneuver' because expenditure of health care and education are not growing but are falling as well (by 0.4 and 0.5 p.p. respectively) which represents a serious drawback of the document restricting its long-term effect.

The draft also mentions that the share of the federal budget in the budgetary system (prior to the interbudgetary transfers) is planned to cut solely by 0.4 p.p. from 48.3% in 2015 down to 47.9% in 2018, in other words it will practically remain unchanged. The share of the federal budget expenses in the overall volume of state expenses will be reduced more significantly from 35.9% to 33.7%, by 2.2p.p.

Proposed budgetary policy allows to share the hope of the documents authors that based on it draft budgetary policy for 2016-2018 will contribute to launching of structural changes in the economy, encouraging economic growth rates, formation of conditions for private investment in mid-term period.

Vasily Zatsepin – Candidate of Science (Military), head of Military-Industrial Sector of Economy Department