In early may, the Ministry of economic development in its forecast assumed that by the end of 2019, all state potbelly — the Reserve Fund and national wealth Fund may be exhausted. The Ministry considers that the Reserve Fund will end in 2017. “Tape.<url>” figured out how Russia will be able to survive without accumulated more than a decade of inventory.
In the last few years, both funds are rapidly declining, despite the enormous gain in exchange rate difference due to the devaluation of the ruble (funds — part of the international reserves and kept in currency). According to the Ministry of Finance on 1 July, the amount of the Reserve Fund is 2.46 trillion rubles. SWF to 4.68 trillion rubles.
At the current level of budget deficit (2.36 trillion rubles) funds will really last only three years. However, according to the Finance Ministry, due to the austerity measures of NWF and will remain, a decline of only up to three trillion rubles.
And yet there is a risk of the complete exhaustion of the reserves, especially in bad economic conditions. However, according to the Director of the Institute of Economics Ruslan Grinberg, the exhaustion of the Reserve Fund is not the end of the world, as the state has several options, which can neutralize the lack of reserves. At least six directions stands out especially.
Raising taxes
This option immediately comes to mind. The argument for it is obvious — the tax burden in Russia does not exceed 35 percent of GDP, which is considerably lower than in most developed countries, and even slightly lower than in the developing States of Eastern Europe. For example, in Poland the figure is 40 per cent, in Estonia and Lithuania, at 37 percent. That is some potential to increase the fiscal burden is.
Now the country has a President declared a moratorium on increasing the tax burden, but in 2018 it will be completed. And some suggestions for tax increases are already being discussed in the state Duma and the government. In particular, the deputies allowed the introduction of a progressive scale of tax on income of individuals. This measure will primarily affect wealthy citizens. Deputy Prime Minister Olga Golodets proposed to increase personal income tax for Russians earning more than seven or eight million rubles a year. It also covers options for improving the value-added tax (indirect tax on consumption), as required to make the IMF in Ukraine.
Photo: Roman Galkin / RIA Novosti
All these proposals are still refuted at the level of the Ministry of Finance and economic development. The government seems to understand that raising the tax rates, in addition to financial gain, it also carries very large risks. First, revenues may fall. Employees are often paid in envelopes, and firms will be more actively withdraw funds in preferential jurisdiction in the offshore. At risk of falls and small business who will not be able to escape from tax collectors in offshore accounts.
Cost reduction
In fact, this process has already been made a principled decision to freeze budget spending accepted. In fact, it means their serious decline. Even if the plans of the Central Bank on inflation are realized, each year the real cost will be reduced by four percent.
This simple solution minuses too. First, the spending cuts will reduce investment in the economy (albeit not always effective). Secondly, the standard of living of the population is dependent one way or another from the Treasury spending would be reduced. As a result, suffer and consumer demand, which would undermine the entire economy.
Again with a too strong compression of the budget funding we should expect a wave of discontent. On the other hand, other things being equal, the fall in government spending will provide some slowing of inflation. This has a positive impact on the state of the financial markets in the country.
In General, it is not surprising that the government prefers this option. But what happens in three years if current prudent action to freeze does not give a result, it is difficult to predict — more drastic steps the state can and can’t go.
Photo: Ilya Pitalev / RIA Novosti
External debt
Financing through external debt — one of the traditional ways out of the fiscal crisis. Examples in the world more than enough, since the world’s largest economy — the United States, where the debt limit increase every few years.
Russia seems to be good opportunities for borrowing from outside. The last bond placement is confirmed — the demand for Russian Eurobonds twice oversubscribed. The volume of foreign debt for many years is kept at below five percent of GDP. Even in most developing countries this figure is three times-more than four times.
But all is not so simple. First, sanctions against Russia has not been canceled. Although formally they do not affect state obligations in foreign markets, investors wishing to buy Russian debt, are political pressure. The complicated foreign policy situation increases the risk in itself. Finally, investors have a prejudice about the solvency of Russia. This factor also forced to sell Russian bonds with some discount. So to talk seriously about large-scale borrowing abroad only in the event of the lifting of sanctions.
In addition, there are serious doubts about the willingness of the government to borrow more abroad. The state goes to it reluctantly, fearing more dependent on foreign investors. In addition, the increase in external debt burden endangers the ruble, making it more vulnerable to speculative attacks.
Domestic debt
This option looks at our situation more attractive. Russian investors buy bonds of Federal loan of more than willingly. Some time ago, the government even thought about a “mix” of internal and external debt — the sale of ruble-denominated liabilities to foreign investors. Due to the devaluation of these plans had to be temporarily collapse.
Over the last three years the Russian domestic debt has doubled in absolute terms and have increased significantly relative to GDP. There is no doubt that the government will continue to use this tool. The only question is, to what extent. With all the convenience of a schema of domestic borrowing it has one very serious drawback.
In conditions of economic crisis, the money allocated for the purchase of public debt, are flushed out of active circulation. They are neither investment nor private consumption and, therefore, overly rely on the expansion of the OFZ market is not necessary.
Devaluation
The conscious depreciation of the ruble is a powerful tool of economic policy. It can be used to balance the budget. For example, analysts at Bank of America believe that the price of oil at 25 dollars per barrel, the dollar could jump up to 210 rubles.
Photo: Viktor Korotayev / Kommersant
At higher oil prices, the Russian currency will have to weaken are not as radical. Advisor on macroeconomics General Director of the brokerage house “OTKRITIE” Sergey hestanov believes that is the most probable variant of actions of the state in the case of emptying of the capsule.
However, the devaluation is a deep shock to the economy. Of course, part of the manufacturers from it wins, but the sharp decline in imports will hit the living standards of the population and will inevitably drive inflation. In the long-term stability of the ruble will bring more benefits than short-term gains from balancing the budget and growing the profits of exporters.
Economic growth
Finally, the tax base, and hence budget revenues can be increased due to the rise of GDP. Plus, this approach does not have to sacrifice. Minus: it is the most difficult.
This requires real structural reform. And unlike other methods, there is nothing to decide by the stroke of a pen in one document — we need multilevel painstaking work. Ready for it if the state is still unclear. While predictions for the coming years is rather pessimistic: Russia entered a period of stagnation, and even upon reaching the proverbial bottom growth will be anemic, in terms of one or two percent.
Experts are very skeptical. According to head of the Department of stock markets and financial engineering of Ranhigs, former Chairman of the Central Bank Konstantin Korischenko, growth through internal sources, not exports remains an unlikely scenario. First of all, because of the continued rigidity of monetary and fiscal policy.
There is, however, the option assumes a considerable increase in the price of oil and other raw materials. Then growth will resume by itself, allowing not to resort to printing the strategic monetary reserves. However, looking at the current situation on the world markets, the problems in China and the European Union, the slowdown in the US, count on it not worth it.
To summarize, we can say that the state is likely to choose a combination of several measures.
Konstantin Korischenko inclined to think that the national debt will grow, and spending to decline. “The expenses have already been asked to freeze the tax increase is very dangerous and for political and for economic reasons. So we will increase the national debt, since he is very small by any standards”, — said the economist. In addition, according to Korischenko, non-oil revenues are growing now, but if commodity prices will recover at least part of the lost positions, and commodity revenues will significantly increase. In General, for the next five years the money will be enough.
