Good morning, colleagues. The Federal Treasury has substantial results to report. The treasury was the first among the ministries and agencies to put in place a system of electronic document processing. Today you do not have to come to the treasury; you can work with it at a distance and exchange the full range of necessary documents. This is an example that all the other ministries should follow. And yet we must be aware of new challenges. That system too needs to be improved.

The efficient work of the treasury was one of the key ingredients in the success of the federal authorities during the crisis years, especially in implementing the anti-crisis programme. I recall 1997-1998 when I came to work at the Finance Ministry. We had to channel our payments through commercial banks, and we had to ensure the work of institutions while being short of funds in the government's accounts. They were spread out among various accounts. Today there is a single account and an efficient payment system. Decisions are being communicated online in real time to any point in the Russian Federation.

The role of the Federal Treasury, though not so noticeable at first glance, was central to implementing the anti-crisis programme, as we have all seen. The key point was the prompt implementation of all the decisions. There have been huge delays in preparing and passing decisions, but there were no problems in communicating these decisions. This gives us the basis for summing up the results of 2010, the first year after the crisis, the "rebound" year, as we say. In the first year it is always easier to achieve growth because it begins from a lower base. The federal budget revenues stood at 8.303 trillion roubles and expenditures at 10.115 trillion. Figures are being updated as reports come in. I can update the budget deficit figure for last year. Previously I said it was about 3.9%. Now we have more accurate data, and it is 4.1%. This is because the nominal GDP turned out to be slightly less than we had assumed. Reports are in on the expenditures of our institutions, including those located abroad. We see that the deficit is already 4.1%. That is about the amount we had projected considering the more favourable oil prices and higher revenues.

We set the target of eliminating a budget deficit by 2015. Based on a preliminary estimate, we assume the price of oil will be $90 per barrel in 2015. That is a good price, higher than in the crisis years. In 2009, the average annual price of oil was $61.1, and last year $78.2. In July 2008, the price of oil was $139 per barrel and in December 2008 – $32 per barrel. That means that the risks for export revenue for our budget are very high. We must always have a safety margin to be able to fulfill all the government's social obligations and the country's other essential programmes. Therefore, we will have to reduce the deficit. Social spending accounts for the largest portion of our expenditures. It is adjusted for inflation to ensure that the real wages, pensions and benefits remain the same. The same kind of indexation is carried out, for example, with regard to such items as food for hospitals.

Work is proceeding according to plan, and the budget, even with the deficit I have mentioned, has a good margin of safety. But we must bear in mind that in the next three years, which will be a favourable period, we must gradually reduce the deficit so as to be confident of fulfilling all our obligations in the following years. Hard work will be required to preserve such a balance in the years ahead.

Another conclusion from the crisis period: On the whole our budget system has performed decently, minimizing the consequences of the crisis. In the crisis years real incomes did not fall and managed to support key economic sectors out of the budget, from agriculture to large industrial enterprises. We allocated extra money for small business. A large amount of work was carried out within a brief space of time. Banks received support, mainly through credit leverage. The banking system has now recovered and has been increasing its loans to the economy. Everything seems to have worked, and we took timely measures. But there is one position on which we lag significantly behind other countries in terms of dealing with such situations efficiently. I am referring to the efficiency of institutions: above all the institutions of government and the institutions of the market and the practice of law enforcement. All this prevents our decisions from being implemented quite efficiently. There are malfunctions in the management system, malfunctions in communicating decisions and the decisions are not always carried out precisely. At this stage excessive bureaucracy and corruption are the main obstacles.

The work of institutions is very important and it is still a problem to be addressed. The treasury is one of the agencies that form the new institutions. Such institutions value among others things, transparency and openness. The treasury, in meeting its public obligations, posts all the information on its sites in a timely manner thus contributing to openness and transparency in the activities of the government. Take, for example, our national government procurement site, which is administered by the Federal Treasury. It is one of the key institutions created in recent years. From the moment each ministry starts to post data on what it plans to buy, at what prices and on the results of the tender, public control of government spending begins. We welcome all the non-governmental organisations and independent experts who analyse these tenders. Granted, some do it with ridicule, some with surprise, some for scientific purposes. But the work of the organisations and experts I have referred to makes our ministries and agencies, which sometimes post astonishing data on their purchases, sit up and take notice.

This is one of the leading institutions of openness and transparency being created in our country. It establishes a dialogue, provides feedback and shapes social movements. The frontiers of transparency were extended on January 1. That site now posts all the procurements of the regions and municipalities. We carried out this work in cooperation with the Ministry of Economic Development. At the final stage we gave up the idea of creating special bodies or agencies to administer that site. The treasury has assumed a significant part of that work. I would like to thank you for this. I am aware how much the members of the treasury's staff present here have done to introduce that consolidated nationwide site by January 1. If it had not been done in a timely and efficient manner, there would have been obstructions in procurement process. Most importantly, government bodies and municipalities and commercial entities can now work with this site. This is an example of the formation of a leading institution in the country that creates a new atmosphere in the analysis of government spending. If there is no feedback there will be still less trust in government spending, and especially the increase of taxes. Everybody must understand where these taxes go and whether they are used sensibly and effectively.

We will have to implement other parts of the state programme aimed at more efficient budget spending. The programme has been approved and it sets down the goals for the development of the entire financial system. Medium-term goals have been set in which the Federal Treasury will have to be involved. The reform of the budget payment system will continue. We need to make sure that all the government payment operations are conducted through the single account of the Federal Treasury at the Bank of Russia by transferring the numerous bank accounts of the budgets to the treasury accounting system. All this work is to be completed by 2017, when there will be no accounts left outside the treasury and there will be only one treasury account with the Central Bank. And 2017 is the centenary of the October Revolution. Transferring all these accounts will be another kind of revolution, yet this time a positive one. It would mean a qualitatively new level of efficiency in managing state finances. The number of participants in the national payment system will be minimized, the velocity of the circulation of money will increase and the cost of state payment operations will diminish. As a result, the Central Bank will have to shut down the centres that cater to the budgets of the regions of the Russian Federation. I estimate that about 20,000 jobs will be shed from the Central Bank. The treasury, even taking into account the targeted 20% staff cuts, will assume responsibility for that work. You can add to your cuts the downsizing of the staff of the Central Bank, which will make the global economy feel very real. At present, the treasury has a staff of 56,000. You have to cut it by 20% added to a cut of 20,000 jobs at the Central Bank. No ministry or service has been able to match such efficiency.

Another system that is being created to make government spending more efficient is the Automated Government Finance Management System. It makes it possible to analyse cash flows, calculate the efficiency of spending on the basis of the results achieved. Today we are working on ways to improve the delivery of payments. But the next task is to assess the results and compare them with the cost of achieving the results. That would be another minor revolution.

In the current system, we often discover that the ministries and agencies have made the wrong plans and that the project has turned out to be more expensive and the prices higher. Now we will be able to see this by creating a system to analyse the effectiveness of government spending and by applying new methods of expenditure analysis. We will develop recommendations on increased efficiency more quickly.

The efficiency of our budget spending is still low. Efficiency begins with planning, with asking the question of whether it makes sense for the state to incur these expenditures. Today inefficiency of state spending begins when we try, as sometimes happens, to supplant the private sector. We say that our investment climate is not good enough, inflation is high and interest rates are high. Therefore, we should provide a level playing field for domestic enterprises and foreign partners. So the domestic enterprises must be subsidised. For example, we have a programme for the development of agriculture. Half of it is subsidies for reducing loan interest rates. Half of the money goes for subsidies, i.e. simply to combat inflation. The same is true of support for industry. At least a third of expenditures go not into R&D, but to subsidise interest rates. In other words, first we fail to meet the inflation target and then use part of the budget to combat it. That vicious circle must be broken.

First, we must make sure that the state spending plans are adequate. The scope of authority must be clearly delimited. Everyone must answer for his or her own business. For example, we are not very good at creating infrastructure or supporting science. But we spend more than a trillion roubles in subsidies to the regions of the Russian Federation. That is another instance of the improper distribution of spending. It undermines the balance of responsibility for results between the state and business, between the federal level and the regions of the Russian Federation. Then we begin to plan the results within ministries and agencies. As a rule, the ministries and agencies initially put on the table a heap of ambitious plans to justify their huge spending. Gradually, as the concept emerges, the results are deflated somewhat. And they are deflated still more in the process of implementation. This goes to show that planning is one of the key elements in boosting efficiency.

Once money has been disbursed, Federal Law No.94FZ kicks in. It seems to be difficult to challenge because everything is done by tender, everything is fine, only the prices, for some reason, are high. For example, the prices to support the road network in Russia vary between $27 and $55 per kilometer. In Finland, a country with a climate similar to ours, the price is $9.5. We send representatives of Rosfinnadzor, who report back that the tenders have been conducted properly, the price has been determined according to the law and that no irregularities have been found. But the problem lies on the surface. We are slow to change the system of administering such tenders, such spending. The obvious things that leap out at you are not rectified in a timely manner.

After everything seems to have been done properly the next problem is the discovery of misuse or simply embezzlement. At this stage the Audit Chamber steps in, and that is the final stage in the analysis of all the processes when culprits need to be named. But if the planning was wrong from the start, then there is no one to hold accountable. Everything has been done according to plan and the tenders have been properly held. Thus, increasing efficiency is the key task of the budget system.

To go back to the challenges facing the treasury, I have already mentioned optimising the size of its staff. This will take place along with the improvement of technical support and the launch of new information systems. That will take on some of the load. Part of the savings from staff cuts will be used to pay bonuses to remaining staff members. On the whole, I would like to recognise once again the high level of efficiency of the treasury's work.

Thank you.