Government spending to be boosted through developmental institutions.
Yesterday evening, Prime Minister Vladimir Putin chaired his first cabinet meeting on federal targeted programmes (FTPs) in the 2011 budget. The meeting set forth key priorities of budget policy for next year: a relatively stable rouble, an end to the expansion of federal targeted programmes, and a new orientation to state investment through developmental institutions. Three new major FTPs were named: the amended Housing Programme, a comprehensive reform of the housing and utilities sector, and a programme to develop education. Neither innovation nor modernisation was mentioned during the public portion of the meeting.
Yesterday Vladimir Putin chaired the first budget meeting with the departments concerned on the budget process in 2010. In fact, the preparation of the 2011-2013 budget draft began in February, but even key priorities of the country's budget policy have not yet been named, and there is no information on what parameters the macroeconomic forecast will be based, nor on whether the government intends to increase or cut state expenditures. The initiative to transition from FTPs to long-term targeted programmes which was advanced by Deputy Prime Minister Alexei Kudrin in February and supported by Vladimir Putin, adds to the uncertainty of the situation. According to the Finance Ministry, the first long-term programmes could be launched in 2011 (and thus become subject to previous budget planning), or from 2012 (and thus be absent from the real budget for 2011-2013). Moreover, it was unclear until last evening how the Putin government intends to implement the rather costly instructions given by President Dmitry Medvedev – primarily in the spheres of energy efficiency and education – with the current budget deficit. The meeting ended late at night on March 9, with at least some uncertainties clarified by Mr Putin's opening remarks.
First of all, unlike the 2010-2012 budget, which was not actually a three-year plan, the 2011-2013 budget must be adopted in keeping with the "running" technology prescribed by the Budget Code. Vladimir Putin explained that "we temporarily deviated from it last year in order to take extraordinary measures [under the anti-crisis programme – Ed.]. The 2011-2013 budget will be adopted as planned," that is, it must be finalised by August 2010.
The prime minister spoke quite little about the macroeconomic structure of the future budget. Apart from routine statements on the need for "macroeconomic stability," Vladimir Putin said that, given current oil prices, a reasonably surmountable deficit, and the current plan for its reduction, the government may even see an eventual budget increase. Allowing for a "just proportion between our debt obligations and resources," the prime minister said, "these resources could be even boosted to an extent." What follows is the government's plan for a moderate strengthening of the rouble in 2011-2013 along with the subsequent resumption of capital inflow (together with carry trade). Although the growth of the reserve fund is currently unfeasible, the government thinks that the growth of international reserves managed by the Central Bank is both possible and desirable.
The ministers who were most interested in FTPs, however, did not hear anything reassuring from Mr Putin in the public portion of the meeting. Long-term targeted programmes were not mentioned at all, but the prime minister did mention the need to prepare a reform of state institutions [see Kommersant of February 15] and the transfer to targeted financing of state expenditures, which is a part of the budget ideology designed by the Finance Ministry through long-term programmes. However, the Prime Minister would not advise to lobby an increase in state spending on FTPs. "We should not forget that, alongside FTPs, we have quite a few other developmental instruments, such as the investment fund, Vnesheconombank, Rosselkhozbank, Rosagroleasing, special economic zones, concession agreements, support for exports, and the subsidising of interest rates on loans," he said.
Finally, the prime minister named the three new FTPs that are to be budget priorities in 2011-2013. These are the programme of comprehensive modernisation of the housing and utilities sector (to be fully operational by 2013 with the abolition of the housing and utilities fund), the programme to develop education, which includes the President's initiative Our New School, and, finally, the amended Housing FTP, which accumulates national projects for the provision of state housing.
In addition, Mr Putin declared the need to enhance energy efficiency. Apart from "energy efficiency" and the school project, the prime minister did not refer to any other major presidential initiatives in his speech; at least, no mention was made of "innovation and modernisation".
By Dmitry Butrin