The following issues are scheduled for discussion at the September 23, 2009 meeting of the government of the Russian Federation:
1. Forecast of the Social and Economic Development of the Russian Federation for 2010 and the Planning Period of 2011 and 2012
The forecast of the social and economic development of the Russian Federation for 2010 and the parameters of the forecast for the planning period of 2011-2012 are based on the scenario of the social and economic development of the Russian Federation approved by the government of the Russian Federation, the benchmarks and priorities of social and economic development envisaged by the Concept of Long-Term Social and Economic Development of the Russian Federation as well as the results of the social and economic development of the Russian Federation in January-August, 2009.
The world crisis has exerted a particularly powerful influence on the Russian economy. In the pre-crisis period of 2003-2008 Russia made the most of the opportunities offered by favourable external economic conditions. Their dramatic deterioration caused exports to fall and capital to flee, leading to a slump in industry, trade and investment.
GDP dropped by 10.2% in the first eight months of this year compared to the same period of last year. Internal demand dropped even more, especially as regards gross savings, both due to a drop of investment in capital stock and a fall in reserves.
Net export of goods and services is making a positive contribution to GDP dynamics. Oil prices increased by almost 150% between April and August and the physical volume of exports began to recover by the middle of 2009.
The government's anti-crisis measures are beginning to yield positive results, including an increase in government spending, easier access to credit due to refinancing by banks, principally by state-owned banks, of the accrued debts of enterprises and budget subsidies of interest payments.
As a result of the improved world economic situation and the anti-crisis measures, a turning point in the economy occurred in June-July when GDP grew (taking into account the seasonal and calendar factors with regard to the previous months), according to the Economic Development Ministry. On the whole, the transition to positive economic dynamics is expected to slow down the decline in GDP to 6.8% in the second half of the year to bring it to 8.5% on an annualised basis.
The main factor behind the recovery in GDP in the second half of the year is expected to be the growth of industrial output driven above all by increased exports and gradual restoration of inventories.
Between January and August, industrial output dropped by 14% on the same period of the previous year. The processing industries were the worst affected. Since the beginning of the year, output in that sector dropped by 19.8% affecting both exporters (especially metallurgy) and the machine-building and the construction materials industries. The first quarter of 2009 was the most difficult, while in the following months the recovery of the world commodity markets improved the situation in the export-oriented industries (metallurgy, chemistry, petroleum products).
In June-August internal demand picked up, and, coupled with the processes of import replacement, that gave a start to the restoration of output in most sectors geared to the domestic market. The dynamics of industry is expected to continue to improve due to the positive impulses both as regards inventory and external demand. In 2009 industrial production is expected to drop by 11.4%, and in the processing industries by 15.5%.
In contrast to industry, agriculture has proved to be highly resistant to the crisis phenomena. In January-August agricultural output dropped by 3.7% and is expected to remain at the 2008 level for the year.
In January-August 2009 investment in capital stock dropped by 18.9% on the same period of 2008. With economic uncertainty and problems with credit, no major recovery in investment is expected in the second half of 2009, capital stock investment at the end of the year is expected to drop by about 20%.
The construction business dropped by 18.5% since the start of the year compared with January-August 2008, and the decline in the construction industry continues.
At the same time, that period saw a growth in construction of newly commissioned housing supported by the building of individual homes by households with their own and borrowed money (up by 8.1% in the first half of 2009 on the same period of last year). Although the introduction of new housing financed from the federal budget dropped by 25.6% in January-August, the government's measures to support house mortgage and regional housing programmes contributed in a major way to maintaining a positive dynamics of the introduction of new housing. In the first eight months of this year, 29.7 million square metres of residential stock were introduced, up 1.2% on the same period of last year. At the end of the year the amount of new housing introduced is expected to reach 52-55 million square metres.
Although consumer demand has continued to fall, it dropped much less than other components of GDP in the first eight months of 2009. Retail trade in January-August dropped by 4.7%, and the amount of paid services delivered to households by 3.5%. The continuing slump in consumer credit and uncertainties in the labour market are expected to lead to a stagnation of consumer spending before the end of the year. On the whole, retail trade in 2009 will be down 6% on 2008.
As a result of the economic contraction and growing unemployment, real wages dropped by 3.3% in January-August. Real disposable incomes of households dropped by only 0.7% compared with the same period in 2008. This is partly due to the rise of pensions and social benefits and the effect of increased purchase of foreign currency by households in the early stages of the crisis. On the whole, according to the Ministry of Economic Development, real wages in 2009 are expected to drop by 4.6% and real disposable incomes by 4.1% compared with the previous year.
Inflation in the consumer market ran at 8.1% in January-August, 2009, which is less than in the same period of last year by 1.6 percentage points. On an annual basis, inflation in August dropped to 11.6% against 12% in July.
The slowdown of inflation is attributable above all to increasingly limited demand and comparatively tough monetary policy.
In the remaining period of 2009, inflation will still be kept back by the low solvent demand of the population. Inflation will also be mitigated by the drop in world grain and food prices and an expected drop of world oil and petroleum products prices at the end of the year which should stop the growth of fuel prices. Thus, in the second half of 2009 inflation will be 3-3.3%, i.e. lower than a year earlier (4.2%), and will not exceed 11%-12% at the end of the year.
Export of goods, according to the Economic Development Ministry, amounted to $180.9 billion in January-August, 2009 (down 45.1% on the same period of last year). The fall in the value of exports is due not only to the falling export prices, but also due to the substantial shrinking of the physical volume of supplies compared with 2008. The physical volume of exports began to recover by mid-2009, increasing economic buoyancy across the board. Exports are expected to grow in the second half of the year, both due to positive price dynamics (in spite of the predicted drop of oil prices) and due to a further increase of the physical volume of commodity export. Thus exports will amount to $285 billion over the year (39.6% less than in 2008), while in physical terms the drop will be 5% at most (11.3% in the first half of the year).
The drop in internal demand in the first half of the year was largely due to falling demand for imported goods. Imports in January-August stood at $114 billion, down 40.4% on the same period last year. Demand for import is expected to pick up in the second half of the year, notably due to resumed growth of inventories. Over the year as a whole import will amount to $190.3 billion (34.8% less than in 2008).
2. Draft Federal Law On the Federal Budget for 2010 and the Planning Period of 2011 and 2012
Main Parameters of the Federal Budget for 2010 and the Planning Period of 2011 and 2012
1. The Draft Federal Budget for 2010 and the Planning Period of 2011 and 2012 is based on the forecast of the social and economic development of the Russian Federation in 2010 and the Planning Period of 2011 and 2012 which envisages:
2. Main parameters of the federal budget for 2010 and the planning period of 2011 and 2012 are as follows (in billion roubles):
|
Indicator
|
Report |
2009 |
Forecast
|
|||||
|
2005 |
2006 |
2007 |
2008 |
2010 |
2011 |
2012 |
||
|
Revenues
|
5, 127.2 |
6, 278.9 |
7, 781.1 |
9, 275.9 |
6, 713.8 |
6, 950.0 |
7, 455.7 |
8, 069.6 |
|
%% GDP |
23.7 |
23.3 |
23.5 |
22.3 |
17.2 |
16.1 |
15.5 |
15.0 |
|
Expenditure
|
3, 514.3 |
4, 284.8 |
5, 986.6 |
7, 570.9 |
9, 931.4 |
9, 886.9 |
9, 389.8 |
9, 681.0 |
|
%% GDP |
16.3 |
15.9 |
18.1 |
18.2 |
25.5 |
22.9 |
19.5 |
18.0 |
|
Deficit
|
1, 612.9 |
1, 994.1 |
1, 794.6 |
1, 705.1 |
-3, 217.6 |
- 2, 936.9 |
- 1, 934.1 |
- 1, 611.4 |
|
%% GDP |
7.5 |
7.4 |
5.4 |
4.1 |
-8.3 |
-6.8 |
-4.0 |
-3.0 |
The expected volume of the Reserve Fund at the beginning of 2010 will be 1,811.7 billion roubles. The expected volume of the Sovereign Wealth Fund is 2,812.9 billion roubles at the beginning of 2010, 2,536.3 billion roubles in 2011 and 1,787.7 billion roubles in 2012.
Federal Budget Revenues in 2009 and the Planning Period of 2010 and 2011
Federal budget revenues are expected to drop in 2010-2012 from 17.2% of GDP in 2009 to 16.1% in 2010, 15.5% in 2011 and to 15.0% of GDP in 2012.
The main factors behind the change of federal budget revenues as a percentage of GDP are:
Federal budget spending in 2010 and the planning period of 2011 and 2012
Considering the significant drop of federal budget revenues compared with 2008 and the need to maintain financial stability, federal budget spending is to be reduced gradually from 25.5% of GDP in 2009 to 22.9% in 2010, 19.5% in 2011 and 18.0% of GDP in 2012.
Total federal budget spending has been set at 9, 886.9 billion roubles (22.9% of GDP) in 2010, at 9, 389.8 billion roubles (19.5% of GDP) in 2011, and at 9, 681.0 billion roubles (18.0% of GDP) in 2012. In nominal terms, budget spending will differ from that in the previous year in the following way: down 0.4% in 2010, down by 5.0% in 2011 and up by 3.1% in 2012, while in real terms the figures will be 9.5%, 12.1% and 3.6% respectively.
Federal budget, considering the need for phased adaptation of the budget system to a reduction of budgetary spending as percentage of GDP, proceeded from the following:
□ ensuring a balanced budget of the Pension Fund of the Russian Federation;
□ providing pensions for servicemen and people equal to them in status;
□ social benefits and compensations adjusted for projected inflation in 2010, 2011 and 2012;
□ preserving the Grant Fund for students at federal education institutions at the 2009 level;
□ financial support of the judiciary;
□ servicing the national debt of the Russian Federation;
□ meeting international and tax obligations of the federal budget-financed institutions which are parties to treaties on behalf of the Russian Federation;
□ granting subventions to the members of the Russian Federation to exercise delegated powers;
□ meeting federal commitments to keep remuneration (salaries, bonuses, wages) of servicemen and persons equal to them, persons holding government office in the Russian Federation, including judges of the Russian Federation, federal civil servants, prosecutors and investigators, employees of federal budget-supported institutions at the level of this year;
□ ensuring defence capability, security and law enforcement activities;
□ implementation of national priority projects Healthcare and Education;
□ supporting hi-tech sectors and scientific-technical innovation;
□ development of the transport system;
□ support of the agro-industrial complex and rural development;
□ provision of housing, including for servicemen;
□ preparation of very important international events (the holding of the 22nd Winter Olympic Games and 11th Paralympic Winter Games of 2014 in Sochi, the 27th World Summer Universiade in Kazan in 2013, and the APEC Summit in Vladivostok in 2012);
□ subsidies to balance the budget sufficiency levels of the members of the Russian Federation and inter-budgetary subsidies of the social character, including the funding of regional programmes that involve additional activities to relieve tensions in the regional labour markets in the Russian Federation;
□ determining the volume of budget allocations to meet other expenditure commitments with adjustment of deadlines, concentration of resources on the most significant events and facilities, optimisation of spending on the upkeep of the government executive bodies and the federal budget-supported institutions with due account for the sectoral specifics, more effective use of the money allocated to support the real sector of the economy and cancelling of low-priority spending.
The section "Interbudgetary Transfers" is still in first place in terms of the amount of spending and its share of total spending will grow due to increased transfers to the Pension Fund (while subsidies to regional budgets will be reduced).
The share of spending under the "National Issues" item will grow, mainly due to increased spending to service the national debt of the Russian Federation (101.5 billion roubles), budget allocations to support the judicial system (0.6 billion roubles), and property contribution to Olympstroi government-owned corporation (102.0 billion roubles). Federal budget spending on control and management functions under the National Issues item will drop by 15.6 billion roubles or 4.4% compared with 2009.
A significant cut is planned in the amount and share of spending on the national economy, which is due to the cut in budget allocations stipulated for 2010 as part of the anti-crisis measures as well as optimisation of spending on federal targeted programmes and subsidies to the economy.
The share of spending under other items remains insignificant because the main powers in the corresponding spheres are exercised by regional and local authorities. The reduced share of spending on education, healthcare and culture is mainly due to reduced spending on the performance of the functions of budget-supported institutions (with the exception of remuneration) and the implementation of federal targeted programmes.
At the same time the social obligations of the Russian Federation in corresponding sectors will be fulfilled, commitments will be met on remuneration of employees of federal budget-supported institutions, the implementation of priority national projects and other activities required for the implementation of government policy.
Thus, the projections submitted correspond to the strategy of ensuring macroeconomic stability and balanced economic growth, of raising long-term balance and stability of the federal budget, scrupulous fulfillment of previous and newly adopted guidelines of budgetary policy for 2010 and the planning period of 2011 and 2012 in accordance with priorities.
3. The budget projections proceed from the strategic priorities set forth in the policy speeches by the President of the Russian Federation and the Prime Minister of the Russian Federation as well as the Budget Address of the President of the Russian Federation.
One of the budget spending priorities is to meet the commitments arising from the changes in the pension legislation aimed at improving the material position of pensioners.
In accordance with the new terms of awarding labour pensions, a fixed baseline pension is set for all recipients of labour pensions, including old-age pensioners, at 2,562 roubles (differentiated in accordance with the recipient's category). The average old-age labour pension will reach 8,408 roubles by the end of 2010, 10,145 roubles by the end of 2012, plus an average addition of 1,250 roubles due to a revision of pension entitlements earned in the Soviet period.
To ensure a balanced budget of the Pension Fund of the Russian Federation and to cover its deficit the federal budget in 2010 will issue a subsidy to the sum of 1,166,300,000 roubles, part of which will be used to cover the deficit formed due to the preservation of the tariffs of insurance premiums at the level of 670 billion roubles, the rate of the consolidated social tax.
Transfers to the Pension Fund of the Russian Federation for the payment of maternity (family) capital in 2010 will benefit 298,000 recipients. In 2010 more than 1.9 million people will get compensation to the sum of 1,200 roubles a month for care of the people with disabilities.
In 2010, to mark the 65th anniversary of Victory in the Great Patriotic War, in addition to budget allocations to support monthly payments of 1,000 roubles, introduced in 2005, budget allocations are stipulated to meet expenditure commitments arising from the decision to pay lump sums of 5,000 roubles to those who fought in the Great Patriotic War and 1,000 roubles to those who worked for the war effort in the rear. In addition, all people with disabilities will be provided with free or cut-rate transportation in accordance with medical indications in 2010.
Budget allocations for the functioning of the accumulative-mortgage system for providing servicemen with housing will be increased substantially.
On the whole, the volume of federal budget allocations to meet public normative and other important commitments of the Russian Federation will grow by 8.8% in 2010 compared with 2009.
Budget allocations are proposed for support of the judicial system in 2010 to the sum of 119.3 billion roubles. The decision took into account the growing allocations to pay monthly life-long support to judges in connection with the increased number of judges entitled to monthly life support (from 19,400 people in 2009 to 22,200 in 2012).
The remuneration of employees of federal budget-supported institutions, the salaries of servicemen and federal civil servants in 2010 will remain at the same level as this year.
That takes into account the fact that beginning from December 1, 2008 the wage funds of federal budget institutions were increased by 30% and as of August 1, 2009 the salaries of servicemen and similar categories were increased by 8.5% (the earlier planned indexation of remuneration [salaries] of persons holding public office in the Russian Federation, including judges of the Russian Federation, federal civil servants, prosecutors and investigators has been abandoned).
Under the 2010 draft federal budget, spending on civilian science is a priority item worth 159.0 billion roubles, with the allocations to be used to finance fundamental research as well as to support hi-tech sectors and scientific-technical innovation, including in the areas of aviation and ship-building, production of instruments, nanotechnologies, electronic components, the space and nuclear industries.
Federal budget allocations to meet expenditure commitments in the sphere of healthcare, physical fitness and sports will amount to 389.0 billion roubles in 2010, including inter-budgetary transfers.
As regards budget investment in capital construction projects that ensure defence capability, budget allocations for 2010 and the planning period of 2011 and 2012 will be aimed at creating production capacity for weapons and military equipment stipulated under the State Munitions Programme as well as fulfillment of the decisions of the President of the Russian Federation and the Government of the Russian Federation on the provision of housing for servicemen of the Russian Armed Forces discharged as part of organisation and staff measures and completing measures to provide servicemen with permanent housing in 2010 and service housing in 2012 and servicemen of other federal executive bodies which are equal to military service with permanent housing in 2011 and service housing in 2013.
In 2010, 53 federal targeted programmes are to be implemented, including 50 ongoing programmes and 3 new programmes (Nuclear Energy Technologies, 2010-2020, the Development of Broadcasting in the Russian Federation in 2009 through 2015 and Social and Economic Development of the Republic of Ingushetia, 2010-2012). Budget allocations for federal targeted programmes and measures outside the Federal Targeted Investment Programme will stand at 977.0 billion roubles in 2010, down 11.1% on 2009.
A cut in the total volume of allocations for federal targeted programmes is due to the fact that 2010 sees the completion of several programmes (State Border of the Russian Federation, Federal Targeted Programme of Education Development in 2006-2010, Housing, The Russian Language, The National Technology Base, Overcoming the Aftermath of Radiation Accidents, Reducing the Risks and Mitigating the Consequences of Natural and Man-Made Disasters in the Russian Federation and some others) as well as due to the concentration of resources on start-up projects, the implementation of key measures of the said programmes, postponement of the deadlines or abandonment of some projects and measures, and due to reduced prices of building materials.
Under the majority of ongoing programmes, given a reduction of proposed budget allocations compared with the original assignments, budget allocations in 2010 will remain at the 2009 level or will be cut by not more than 10%, with the same amounts to be preserved in 2011-2012.
The total federal budget spending in 2010 will be financed out of the reserve of 70.0 billion roubles which, by decision of the government of the Russian Federation, will be used to support various sectors of the Russian economy. In addition, federal loan bonds to the sum of 250.0 billion roubles are to be exchanged under a procedure set out under Federal Law No.181-FZ of July 18, 2009 On the Use of Government Securities of the Russian Federation to Increase Bank Capitalisation, on preferred shares of lending institutions, with the Russian Federation acquiring ownership rights to the corresponding share in the authorised capital of lending institutions.
Sources of Federal Budget Deficit Financing
The main sources of financing the federal budget deficit in 2010 are the Reserve Fund and in 2011-2012 the Sovereign Wealth Fund and other sources of financing the federal budget deficit.
The balance for all sources of federal budget deficit financing will be 691.0 billion roubles in 2010, 1,171.7 billion roubles in 2011 and 798.5 billion roubles in 2012. The balance of internal sources of federal budget deficit financing will be 261.5 billion roubles in 2010, 657.3 billion roubles in 2011 and 223.6 billion roubles in 2012. The balance of external sources of federal budget deficit financing will be 429.6 billion roubles in 2010, 514.4 billion roubles in 2011 and 574.8 billion roubles in 2012.
3. Draft Federal Law On the Budget of the Pension Fund of the Russian Federation for 2010 and the Planning Period of 2011 and 2012
4. Draft Federal Law On the Budget of the Social Insurance Fund of the Russian Federation for 2010 and the Planning Period of 2011 and 2012
5. Draft Federal Law On the Budget of the Federal Mandatory Health Insurance Fund for 2010 and the Planning Period of 2011 and 2012
6. Insurance Tariffs for Mandatory Social Insurance against Occupational Accidents and Diseases for 2010 and the Planning Period of 2011 and 2012
The draft federal law on the issue has been submitted to the government by the Ministry of Healthcare and Social Development of Russia.
Under the draft law, insurance premiums for mandatory insurance against occupational accidents and diseases in 2010 and in the planning period of 2011 and 2012 will be paid by the insured according to the rates and procedure established under Federal Law No.179-FZ of December 22, 2005 On Insurance Tariffs of Mandatory Social Insurance against Occupational Accidents and Diseases for 2006.
Thus, 32 insurance tariffs are preserved for mandatory social insurance against occupational accidents and diseases (ranging from 0.2% to 8.5% of remuneration from all sources [income] of the insured) in accordance with types of economic activity rated by professional risk.
In addition, the benefit on the payment of insurance premiums for this type of insurance existing since 2001 whereby organisations pay the premiums to the level of 60% of the established insurance tariffs for employees who are category I, II and III people with disabilities will be preserved.
This benefit stimulates employers to bring in disabled people into the labour market.
In 2010 and the planning period of 2011 and 2012, while insurance premiums by occupational risk category remain the same as in 2009, the average insurance premium will be 0.5% of the remuneration due and payable. Insurance premium proceeds will amount to 59.2 billion roubles in 2010, 65.6 billion roubles in 2011 and 72.8 billion roubles in 2012, which is sufficient for the Fund to make insurance payments and finance other expenditure stipulated by law.
The total cost of meeting the commitments under the Federal Law On Mandatory Social Insurance against Occupational Accidents and Diseases will amount to 57.5 billion roubles in 2010, 61.8 billion roubles in 2011 and 65.6 billion roubles in 2012 and includes the cost of paying temporary disability benefits in the event of occupational accident or disease, lump sum and monthly insurance payments, the cost of delivering and dispatching insurance payments, the cost of medical, social and professional rehabilitation of the victims and other costs.
The revenue and expenditure under mandatory social insurance against occupational accidents and diseases for 2010 and the planning period of 2011 and 2012 are included in the Draft Federal Law On the Budget of the Social Insurance Fund of the Russian Federation for 2010 and the Planning Period of 2011 and 2012.
7. Draft Federal Law On Introducing Amendments to the Federal Law on the Budget of the Pension Fund of the Russian Federation for 2009 and the Planning Period of 2010 and 2011
The draft federal law would settle the issue of financial support of pensions, allowances and other social benefits in December 2009 covering the holidays and days off in January 2010 and the pension obligations arising from January 1, 2010.
This draft law needs to be adopted because the payments for January to organisations that deliver pensions, allowances and other social benefits are made by territorial branches of the PFR in the period from December 25 to 27 instead of the normal delivery dates that fall on the holidays on January 1-2, in the period from December 28 to 30 covering the delivery days that fall on days off from January 3 to 8 and the following days from January 9 through January 11.
Pensions, allowances and other social benefits for the January 1-2 holidays are delivered by federal postal service institutions in the period between December 29 and 30. Money is to be entered in deposits and cash issued to recipients of pensions, allowances and other social benefits due on days off and holidays from January 1-11in the period from December 28 through December 30.
This procedure of remittance and delivery of pensions, allowances and other social benefits to the recipients has been followed annually by territorial branches of the PFR, the Russian Postal Service and other delivery and credit institutions beginning from December, 2006 thus ensuring social stability among vulnerable social strata, the pensioners.
The draft law will also regulate the relationship between the Pension Fund of the Russian Federation and the federal budget regarding the use of budgetary allocations envisaged in 2009 for the basic part of the labour pension to pay labour pensions with due account of revision for holidays and days off in January, 2010 in December, 2009, with the said expenditure to be included in the report on the implementation of the PFR budget for 2009.
It is proposed to provide financial support for the Fund's obligations arising from January 1, 2010 by amending the consolidated itemised budget of the PFR for 2009, by reducing budget allocations earmarked to pay the basic part of the labour pension for holidays and days off in January 2010, by redistributing the said resources to cover the Fund's budget deficit to pay labour pensions for the said period.
To secure the rights of insured persons to form an accumulated part of the labour pension, the draft law includes a provision that determines the financial source for the compensation of the costs of maintaining the special part of individual accounts of the insured persons who have voluntarily agreed to mandatory pension insurance in order to pay additional insurance premiums to the accumulated part of the labour pension. The financial support of the said outlays is to be provided through inter-budgetary transfers envisaged for the PFR budget under Part 6, Article 25 of the Federal Law On the Federal Budget for 2009 and the Planning Period of 2010 and 2011. The total cost at the end of the year may amount to 2.0 million roubles (the reported figure for the first six months is 716,300 roubles).
8. Draft Federal Law On Introducing Amendments to the Federal Law On the Budget of the Social Insurance Fund of the Russian Federation for 2009 and the Planning Period of 2010 and 2011
The draft federal law expands the list of healthcare organisations entitled to a refund of the cost of their services to bring medical assistance to women during pregnancy, childbirth and in the post-natal period as well as regular outpatient attendance to the child.
The adoption of this draft federal law meets the need of establishing the right of the Social Insurance Fund of the Russian Federation to pay for the services of medical assistance to women during pregnancy and medical assistance rendered to women during childbirth and in the post-natal period as well as preventative checkups of the child in higher medical education institutions, medical research organisations which comprise clinics, i.e. preventative and treatment institutions operating under a license to engage in medical healthcare activities under the headings of "birth attendance and gynecology and (or) pediatrics".
9. Draft Federal Law On Introducing Amendments to the Federal Law On the Budget of the Federal Mandatory Health Insurance Fund for 2009 and the Planning Period of 2010 and 2011
10. Amendments to the legislation of the Russian Federation in connection with the adoption of Federal Laws on the Budgets of Government off-Budget Funds for 2010 and the Planning Period of 2011 and 2012
11. Draft Guidelines For National Monetary Policy for 2010 and in the Period of 2011 and 2012
The Bank of Russia has submitted draft guidelines for the national monetary policy for 2010 and the period of 2011 and 2012.
The draft guidelines describe the state of the Russian economy, contain a forecast of the fulfillment of the main monetary policy parameters in 2009, a forecast of the main balance of payments indicators and monetary policy benchmarks for 2010 and the period of 2011 and 2012. In addition, the draft guidelines offer scenarios of macroeconomic development for 2010 and the period of 2011 and 2012.
The Bank of Russia has also submitted its plan of measures for the coming year to improve the banking system in the Russian Federation, bank supervision, financial markets and the payment system.
The draft guidelines point out that in the coming three-year period, the main target of the national monetary policy remains cutting inflation to 9%-10% in 2010 and 5%-7% in 2012.
Assessing the development of the Russian economy and the monetary policy in 2009, the Bank of Russia notes that the economic situation in January-July 2009 was significantly worse than in 2008. Due to the world economic crisis and falling demand for Russian exports in the context of lower world oil prices and net outflow of private capital, GDP fell by 10.4% in the first half of 2009.
The devaluation of the rouble due to the financial and economic crisis and the resumed growth of prices in the world commodity markets in early 2009 tended to push prices up. At the same time, prices were kept down by shrinking demand. The strengthening of the rouble since the end of the first quarter of 2009 has been limiting the growth of prices in the consumer market.
On the whole, in the opinion of the Bank of Russia, consumer market inflation in 2009 may be under 12% compared with 13.3% in 2008.
The balance of payments in January-June, 2009 was exposed to a contraction of external and internal demand, deteriorating terms of foreign trade and causing a noticeable change in the balance of cross-border movement of goods, services and capital. Shrinking foreign trade was accompanied by the export of capital by the private sector.
The trade balance surplus in the first half of 2009 dropped to $43.2 billion compared with the same period of 2008 because the cost of exports was falling faster than the cost of imports (in January-June, 2008 the trade surplus was $101.1 billion). The current account surplus fell by 73% to $17.2 billion.
The net outflow of private capital in January-June, 2009 is estimated at $27.6 billion (the first half of 2008 saw a net inflow of $17.0 billion).
In 2009, given the average annual price of oil of $57 per barrel, the current transactions account may report a surplus of $32.4 billion. The surplus of the goods and services balance is estimated at $67.7 billion.
According to the Bank of Russia the net outflow of private capital will amount to $42.0 billion and will not be fully compensated for by the current transactions account surplus. On the whole, the currency reserves are expected to drop by $3.0 billion in 2009.
In 2009, the exchange rate policy of the Bank of Russia, considering the substantial change of the situation in the internal currency market due to external factors, was aimed at ensuring the stability of the national financial system and mitigating the impact of the world financial crisis on the Russian economy.
In January, 2009 the Bank of Russia continued a gradual adjustment of the upper and lower boundaries of the two-currency basket begun in the autumn of 2008, setting them at 41 and 26 roubles respectively. That was a step towards making exchange rate policy more flexible.
According to the Bank of Russia the real effective rate of the rouble against foreign currencies dropped by 6.4% between December 2008 and August 2009, with the rate of the US dollar and the euro against the rouble rising by 8.3% and 9.7% respectively between January 1 and September 1, 2009.
According to the draft guidelines, in 2009 the slowdown of the economy will have a negative impact on the growth of demand for money. In the first seven months of 2009, rouble money supply dropped by 2.8% in absolute terms.
In accordance with the draft guidelines the inflation target has been set for 9.0%-10.0% in 2010, 7.0%-8.0% in 2011 and 4.5%-6.5% in 2012.
The expected gradual improvement of the macroeconomic situation will tend to stabilise the rate of growth of demand for money in 2011 and 2012, according to the Bank of Russia.
The Bank of Russia exchange rate policy in the medium term will seek to prevent major fluctuations of the rouble in the world currency basket. The Bank of Russia sees as its main task during that period the creation of conditions for implementing a model of monetary policy based on targeting inflation, while gradually reducing direct interference in the process of exchange rate formation. The Bank of Russia will continue to use the two-currency basket (the euro and the US dollar) as the operational indicator in implementing exchange rate policy during the transition to a floating exchange rate regime.
Regarding the use of the system of monetary instruments in the medium term, the Bank of Russia states that it will be oriented towards creating conditions for implementing an effective interest rate policy.
If a substantial shortage of liquidity develops in the banking sector, the Bank of Russia will continue using the entire range of refinancing tools, which means a combination of transactions of granting liquidity against a collateral (direct REPO transactions through auctions and at fixed rate) as well as transactions of granting unsecured loans. Broadening the range of periods of refinancing (from one day to one year) will enable the Bank of Russia to control current liquidity in a more flexible manner and stimulate credit activity of the banking sector and the formation of long-term interest rates in the money market.
In the event of excessive money supply, the Bank of Russia will sterilise it through transactions with Bank of Russia bonds and transactions of selling government bonds from its own portfolio. The Bank of Russia will also continue deposit transactions as an instrument for "tying down" free liquidity of lending institutions in the short term. In the process market instruments will be used to withdraw excess liquidity such as deposit auctions, as well as permanent instruments, such as deposit transactions at fixed interest rates.
12. Extending government guarantees on loans obtained by the open joint stock company House Mortgage Credit Agency
The draft executive order of the government on providing state guarantees of the Russian Federation on the borrowing of the open joint stock company House Mortgage Credit Agency (hereinafter draft executive order) has been prepared pursuant to Articles 115, 115.1 and 116 of the Budget Code of the Russian Federation, Article 16 of Federal Law No.204-FZ of November 24, 2008 On the Federal Budget for 2009 and the Planning Period of 2010 and 2011, the Rules of Granting State Guarantees of the Russian Federation on the borrowing of the open joint stock company House Mortgage Credit Agency approved by the Russian government's resolution No.628 of August 25, 2001.
In accordance with the Rules, the Finance Ministry of Russia has considered the business plan for the House Mortgage Credit Agency for 2009 and the draft decisions on the issue of securities and emission prospectuses.
After considering the proposed documents the Finance Ministry of Russia has prepared a draft executive order that would authorise five state guarantees of the Russian Federation worth up to 36.0 billion roubles on the Agency's borrowing in 2009.
13. Draft Federal Law On Introducing Amendments to Part 1 of the Tax Code of the Russian Federation Regarding the Settlement of Arrears on Taxes, Levies, Penalties and Fines
The draft federal law on the issue has been submitted to the government by the Finance Ministry of Russia.
The current Russian legislation on taxes and levies contains some provisions that hamper the exercise by tax payers of their rights to change the deadlines for the payment of taxes, levies, penalties and fines.
In particular, there is no possibility to exercise in practice the provisions of subclause 3, Clause 2, Article 64 of the Tax Code of the Russian Federation (hereinafter the Code) on granting a deferment or an installment plan in the event of threat of insolvency (bankruptcy) if the tax is paid in a lump sum, for which purpose it is proposed that the Federal Tax Service of Russia be authorised to identify the signs of an approaching bankruptcy of the person concerned by applying the relevant methods developed by the Economic Development Ministry of Russia.
The law establishes the list of documents to be attached to the application of the person concerned seeking postponement of the deadline for the payment of tax or levy.
To decide whether a tax payer should be granted the right to change the deadline for the payment of penalties and fines, the provisions of the code on the change of the deadlines for the payment of taxes and levies would be extended to apply to penalties and fines as well.
The size of the investment tax credit made available to the taxpayer engaged in scientific research, design or technical modernisation is increased from 30% to 100% of the cost of equipment acquired.
In addition, the draft law regulates some issues connected with the procedure of collecting arrears on taxes, levies, penalties and fines and writing off bad debts. The procedure of qualifying a tax sum as a bad debt is more clearly defined.
The law introduces changes to the sanctions for tax offences. At present some sanctions for tax offences computed in relative values (for example in percentage of the sum of the tax payable) are disproportionate to the harm caused. At the same time, certain sanctions expressed in absolute values (roubles) have not been revised for more than 10 years and cannot serve as a deterrent to potential offenders.
The adoption of the Draft Federal Law On Introducing Amendments to Part 1 of the Tax Code of the Russian Federation Regarding the Settlement of Arrears on Taxes, Levies, Penalties and Fines would support business entities faced with a deficit of current financing and problems of access to credit resources as well as preserve the level of their business activities.
In addition, the adoption of this law would improve tax administration and adjust the size of sanctions for tax violations in a way that would provide an effective deterrent for potential offenders.
14. Draft Federal Law On Introducing Amendments to Chapters 22 and 28, Part 2 of the Tax Code of the Russian Federation
The draft law would set the rates of excise on excisable goods for 2010-2012 and new transport tax rates.
In view of the increased average consumer prices and the level of inflation forecast for 2010-2012, it is proposed to increase the specific excise rates for excisable goods by 10% compared with the previous year, with the exception of alcohol and alcohol-containing products, wines, beer and tobacco products.
The rates of excise on alcohol with an ethylated alcohol content of more than 9% are to be retained in 2010 and 2011 at the same level as determined by Federal Law No.142-FZ of July 22, 2008 On Introducing Amendments to Chapter 22, Part 2 of the Tax Code of the Russian Federation, and in 2012 to increase excise rate by 10% on 2011; the rate of excise on alcoholic products containing up to 9% of ethylated alcohol, alcohol-containing products and wine in 2010-2012 is to be increased by an average 30% and for beer by 50%.
With regard to cigarettes (filterless cigarettes) the draft law would increase the ad valorem component of the excise computed on the basis of maximum retail prices by 0.5% every year, and the specific component of the rate on filter cigarettes by an average 30% and filterless cigarettes by 50%.
In addition the draft law would introduce caps on the deduction of excise on excisable raw materials in the event alcohol-containing products are used to produce hard liquor to the amount equal to the sum of excise on ethylated alcohol.
The draft law also proposes to change the timeframe of excise payment: the current procedure of paying excise in equal installments not later than the 25th of every month following the report month and not later than the 15th of the second month following the report period will be replaced by a single excise payment date, not later than the 25th of the month following the last tax period. For taxpayers who possess certificates of registration of a person engaged in operations with straight-run petrol and denatured alcohol, the current deadline for excise payment remains in force: not later than the 25th of the third month following the last tax period.
To enhance the tax autonomy of the executive bodies of the members of the Russian Federation and create opportunities for raising the revenues of regional budgets, the draft law proposes to raise the rates of the transport tax.
The transport tax rates currently applied have not been revised since 2003 when Chapter 28 of the Tax Code of the Russian Federation came into force.
The draft law proposes to double the transport tax from 2010 and allow the regional executive bodies to reduce such rates not by five times, as today, but by ten times, and to increase them by not more than five times.
Considering that the road transport is one of the main environmental polluters, and to stimulate a renewal of the vehicle fleet, the draft law would give the regional authorities of the Russian Federation the right to set the rates of transport tax depending on the age of the vehicle and its ecological class.
Moscow, September 22, 2009
* The press-releases by the Department of Press Service and Information contain the materials submitted by the executive federal bodies for discussion by the Presidium of the Government of the Russian Federation.
