29 june 2009

Prime Minister Vladimir Putin chaired a meeting on the tentative basic parameters of the budget for 2010 and the planning period of 2011-2012, and principles of budget expenditure

Vladimir Putin

At the meeting on the tentative basic parameters of the budget for 2010 and the planning period of 2011-2012, and principles of budget expenditure

Participants:
“During our meeting today we are to determine the main parameters of the budget and coordinate allocations to major projects while bearing in mind that our key priorities are the fulfilment of social commitments and development of healthcare, education, science, high technology and innovation.”

Vladimir Putin's opening address:

Good afternoon, colleagues.

You probably know that yesterday we held a meeting with the leaders of parliamentary parties of the State Duma. We summed up the results of our work in the first six months of the year, the work of the parliament during the spring session, and discussed prospective joint efforts in the second half of the year.

We addressed a number of issues related to the implementation of the anti-crisis measures, notably the availability of loan reserves in the non-financial sector of the economy.

The Government did much at the end of last year and the beginning of this year to deal with the consequences of the crisis in the financial, non-financial and social sectors - I am referring to efforts in the labour market in different regions of Russia. On the whole, they are producing a positive effect.

However, the availability of loan resources remains a key problem today. The Government has drafted amendments to the budget that largely simplify the mechanism of providing state guarantees. This should increase the attractiveness of this instrument for commercial banks, whose risks will be reduced, and for borrowers.

A relevant law has been approved. Today I have signed two Government resolutions facilitating this law. They will be issued immediately after the publication of the law.

I want to tell the banking sector that the new procedure for granting state guarantees was elaborated with due regard for your recommendations, proposals and concerns. The Government has decided to take them into account and to shoulder the main risks.

At the same time, the Government expects that banks will use these new opportunities to consistently expand lending to the priority sectors and to lower the cost of loans.

In accordance with this decision, an additional 300 billion roubles will be issued for state guarantees. It means that up to 500 billion roubles can be attracted to the economy against that sum.

In this context, I am addressing the leaders of banks with state capital. I cannot say the same to commercial banks, where state participation is minor or non-existent - MDM, Uralsib, Alfa and several other banks. So, I am addressing above all Sberbank, VTB, Gazprombank, Rosselkhozbank and VEB. I believe that in view of the Government decisions these banks should increase their loan portfolios by at least 150 billion roubles in July, by another 150 billion roubles by September and to 400-500 billion roubles by October 1.

Of course, banks can and should choose different ways to attain this goal, bearing in mind that the money will be provided by the state. These efforts will be monitored by First Deputy Prime Minister Igor Shuvalov jointly with the heads of financial establishments, who should not plan their summer holidays before ensuring the implementation of this task.

That was the first question. The second question concerns the perennial shortage of allocations to some economic sectors in the first half of the year and subsequent frantic activity in the second half, and especially at the end of the year. This creates difficulties for the real economy and some specific sectors, and increases the risk of an inflation spur over a sharp increase of the money mass at the end of the year.

Therefore, the key ministries and departments that are the main budget recipients and spend the bulk of budget resources - the Ministry of Defence, the Ministry of Healthcare and Social development, the Ministry of Industry, and the Ministry of Transport - must have real cash budgets, not paper with some figures on it. The Minister of Finance will be responsible for this.

Please report to me on the first and second questions in writing on a weekly basis. As for the cash budgets of ministries and departments, the Ministry of Finance will provide summarised reports.

Next, the key issue at the meeting with the leaders of the parliamentary parties yesterday was the preparation of a budget for 2010-2012. I put forth our views and hope that they were supported. I am referring to the stiff principles for forming the budget and a balanced expenditure and revenue policy.

During our meeting today we are to determine the main parameters of the budget and coordinate allocations to major projects while bearing in mind that our key priorities are the fulfilment of social commitments and development of healthcare, education, science, high technology and innovation.

We must also decide which of the less important programmes could be cut or postponed. Two weeks ago, the Deputy Prime Ministers and the Ministers of Economic Development and Finance were instructed to analyse the situation and present their proposals. Today we are going to listen to their reports.

We must also think about additional sources of budgetary revenue. Of course, increasing payments to the state is never a popular decision. It is usually connected to the withdrawal of certain funds from the economy.

However, we should bear in mind that taxes have been cut by as much as 700 billion roubles as part of the anti-crisis package, and this money has remained in the economy. In 2010 we will reduce the tax burden by expanding the right of small and medium-sized enterprises to use simplified taxation rules.

We have also postponed until 2011 the introduction of higher insurance premiums for mandatory pension and medical insurance. At the same time, we plan to increase pensions next year, which implies more than 700 billion roubles of additional expenditure.

In this situation it would be fair and justified to consider possible reserves. For example, some payments and dues have not been indexed for several years, and therefore no longer fulfil the function of providing financial support to the state's operation.

We must take a decision to generate additional revenues if we want to continue to implement our social plans in conditions of a global crisis while maintaining macroeconomic stability and reducing the budget deficit. I am referring above all to improving the collection of taxes. Of course, this process should be extremely fair, without distortions, so as to preserve the necessary resources for rehabilitation and subsequent economic growth.

In conclusion I would like to say what I said at the beginning regarding the financial sector. I am aware of the concerns of our colleagues from the Government's financial and economic divisions and the heads of financial establishments about non-performing loans. Still, I believe that the smaller the volume of loans, the larger will be the NPLs, because your refusal to resume lending is having a dumping effect on the economy and the real sector. Please, take note of this.

Thank you.