Bloomberg admitted the increase in the deficit of the Russian budget before the elections to the state Duma
On the eve of elections to the state Duma the Russian government may go for increasing the budget deficit, to avoid the displeasure of the electorate. According to Bloomberg, the budget cuts may be negatively perceived by potential voters. The Bank of Russia and the Ministry of Finance in one voice oppose the increase of the budget deficit, calling this measure a high risk for the Russian economy.
Reduce costs and increase revenues of the budget before the Duma campaign may cause the dissatisfaction of the electorate “United Russia”, reports RBC with reference to Bloomberg. For this reason, the government is faced with the temptation to go on increasing the deficit, not further cuts.
However, the Governor of the Bank of Russia Elvira Nabiullina and Finance Minister Anton Siluanov oppose such measures. Before officials made the same argument at the Congress of the Association of regional banks. Nabiullina called the imbalanced budget “source of risks for the economy and for monetary policy.” In turn, Siluanov said that the lack of the “necessary measures to reduce the budget deficit is a limiting factor to reduce the key rate”.
Also in his speech, the speaker drew special attention to inflationary risks associated with the budget. “Urgently needed to develop programs that would allow to balance the budgetary system in the medium term”, – said the head of the Central Bank.
The U.S. Agency reminds that the Russian budget for 2016 spending, based on oil prices of 50 dollars per barrel. In fact, a barrel of Urals in January-March, according to the Finance Ministry, was worth on average 31,99 dollar.
According to Siluanov, the budget imbalance can lead to shocks, similar to the crisis of 1998-1999. As reported earlier in the year, the adjustments to the budget, the government planned to start in April. “If we don’t do that, there will be the same as it was in 98-99, when the population will pay through inflation for what we did in part bring the budget in line with the new realities”, – Siluanov said at the Gaidar forum in January.
The chief economist FG “BCS” Vladimir Tikhomirov in a conversation with Bloomberg said that “the Central Bank and the Finance Ministry are helping each other, occupy the same position”. According to the analyst, the “chance to defend the budget balance, despite the efforts of sectoral ministries to defend the expenditure, large”. At the same time, Tikhomirov believes that due to the Duma elections, real cost reduction can take place only in the fourth quarter, which accounts for a significant part of them.