Why a balanced budget is essential for growth

If we do not succumb to the temptation to “eat away” the additional revenue, then by 2020 we will be able to begin to increase the funding priorities at the expense of much better, more sustainable sources

The Russian economy is recovering after one of the most difficult strength of external influences over the past half century crises. We were able to adapt quickly and effectively to external shocks: the Western sanctions and the subsequent collapse of oil prices. The result: last year, GDP declined by just 0.2%, and in the amendments to the law on the budget for this year is expected to increase by 2%.

Macroeconomic stabilization, without which talk about growth would not have, became possible thanks to the thoughtful actions of economic authorities. We were able to quickly and without taking drastic and painful measures to reduce the budget balancing oil price from $100 to $60 per barrel. Managed to carry out fiscal consolidation and to find internal reserves in order to increase the efficiency of spending, without abandoning commitments, primarily social. Separate merit of the Central Bank that he was able to achieve the transition to a floating exchange rate and brought inflation target of 4%. If a year ago this figure was called in the expert community skepticism, today it became a reality. The next step taken by the Finance Ministry, — the introduction of a transitional budget rule since February this year — is aimed at reducing the volatility of the ruble. Taken together, all this provides much-needed investors, the predictability of macroeconomic conditions.

The action of the economic authorities in Russia have led to the fact that rating agencies Moody’s and S&P improved the Outlook on the sovereign rating of Russia. Continued adjusted fiscal and monetary policy gives a basis for more favorable assessments by rating agencies. The last review of the IMF mission in Russia contains a high evaluation of our actions. The fact that Russia is better than other countries — exporters of oil to adapt to the effects of the shock fall in oil prices, recognized by the world Bank. Yes, and the current exchange rate of the ruble demonstrates that foreign investors with interest considering investments in instruments denominated in the national currency.

What’s next? We noted the successful completion of Russia’s crisis, but how are we going to promote economic growth? After all, the objective is to provide them at the level above the world average. Today, it is tempting to take advantage of relatively favorable external environment, in order by increasing budgetary allocations to the heat demand. We hear such proposals from a number of experts. The idea is to take advantage of favorable conditions and allocate funds to stimulate domestic demand, from my point of view, the threat to fiscal and macroeconomic stability, which is the Foundation for GDP growth. The budget cannot be sustained when the performance of his spending commitments depends on the external economic environment, especially today, when there are risks of variations in the dynamics of oil prices, due in part to the new growth of shale oil in the United States. With this in mind, it is imperative now to legislate “budget rule” in the Ministry of Finance edition, in order to be able to replenish the Reserve Fund at the time of the agreement to freeze production of countries producing raw materials. These funds may need to budget in the event of deteriorating market conditions and falling oil prices below $40. In addition, the waste of oil and gas revenues could lead to the strengthening of the ruble with all the consequences for the economy consequences.

If we do not succumb to the temptation to “eat away” the additional revenue, then by 2020 we will be able to get a fully balanced budget and to begin to increase the funding priorities at the expense of much higher quality, sustainable income growth which is estimated at not less than 0.5 trillion per year. But it is necessary to spend not more, but smarter and smarter. For example, today the spending on “human capital” is estimated at 20% of GDP. It’s quite a substantial amount. However, there are still reserves for increasing the efficiency of use of the money, so that every rouble allocated from the budget, worked more effectively targeted, providing support to the least socially protected citizens.

Provision for the financing of priorities can be found not in short-term revenues, not increasing the tax burden and broadening the tax base by reducing the informal sector of the economy. It creates imbalance from the point of view of competitiveness of enterprises operating vbeluyu. It is therefore necessary measures of tax policy, using the latest advances in the field of administration to reduce the share of the shadow economy, to improve tax collection. Such offers are considered during the development of the issue on changing of tax laws without increasing the tax burden on business.

Finally, another potential source for funding priorities — improving the efficiency of the public sector. Effectively working companies should Finance their investment projects at the expense of shareholders. Rejection is actually subsidizing state-owned companies by establishing a reduced rate of dividend payments allowed to Finance priority budget expenditures in greater volume.

The authors ‘ point of view, articles which are published in the section “Opinions” may not coincide with ideas of editorial.

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