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MinFin’s draft 2013-15 Federal Budget reveals prudent approach


According to Interfax, the Ministry of Finance has delivered a draft of the 2013-15 Federal Budget to the government. It includes Putin’s pre-election promises (additional budget outlays at RUB 686.7bn in 2013-15) and, simultaneously, a cut in expenditures on national defence and security (by 10% to RUB 2.6tn in 2014, compared with that envisaged in the current 2012-14 Federal budget, and by RUB 636bn in 2015) and in a transfer to the Pension System (by 7% to RUB 2.8tn in 2014 and by RUB 417bn in 2015). Hence, the 2013 and 2014 budget balances are kept the same at -1.6% of GDP and -0.6% of GDP, respectivel. In 2015, MinFin expects the federal budget to be balanced. At the same time, the non-oil budget deficit was decreased 0.2pp in 2013-14 to 10.1% of GDP and 8.9% of GDP, accordingly.

Interfax also reports MinFin’s forecasts beyond the budget planning horizon. In 2016-20, the Ministry sees the budget at a marginal surplus and the non-oil budget deficit gradually edging down.

The draft 2013-15 Federal Budget proposes tightening fiscal discipline, as reflected in the breakeven price of oil declining from USD 115/bbl this year to USD 104/bbl in 2015 (according to the amendments approved by the Duma last Friday, in 2012 MinFin sees the budget deficit at almost zero, with Urals at USD 115/bbl and, according to the draft 2013-15 Federal Budget, in 2015 MinFin expects a balanced federal budget assuming oil at USD 104/bbl). Almost all the extra expenditures during 2013-15 are to be offset by a decrease in military and pension expenditures.

The prospects for such a prudent policy greatly depend on how efficiently the pension system is reformed and the government’s priorities concerning the scale of military reform.

VTB Capital analyst

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