Transcript:

Dmitry Medvedev: Good afternoon, colleagues. Today we will discuss the implementation of the federal budget in the first half of the year, and of the targeted federal and recipient-oriented investment programmes.

I’d like to begin by providing several figures. During the first six months of this year, the gross domestic product (GDP) increased by 4.4% compared to the same period of 2011, and reached more than 28 trillion roubles. The budget was implemented with a surplus of more than 270 billion roubles, the National Welfare Fund has grown to 2.8 trillion roubles, and the Reserve Fund has increased by more than 1 trillion roubles to reach nearly 2 trillion roubles, that is from 811 billion on January 1, 2012. Oil and gas revenues increased by 27% to over 3 trillion roubles, due to growing oil and gas prices. Other, non-oil-and-gas revenues also amounted to 3 trillion roubles, growing by 7.5% compared to the same period last year.

A few words about our expenses. Cash expenses of the federal budget amounted to almost 6 trillion roubles, or 46.3% of the updated budget financing targets for 2012. On the whole, the high quality of federal budget implementation in the first half of the year ensured an economic balance and macroeconomic stability, as well as a factor that is very important for our country – fulfilment of all social commitments.

Judging by the financial report, we have not yet resolved the issue of timely financing and fulfilment of individual obligations. We sometimes lack the necessary funds, but there is also money idling on accounts in some regions. Low cash execution figures have been reported at several agencies, namely the Ministry of Economic Development and the Federal Tariff Service (about one-third each), Roscosmos (less than a third), the Federal Agency for the Development of the State Border Infrastructure (16%) and the Federal Service for Financial Markets (15%). The heads of these bodies must analyse the situation and find a solution. We certainly cannot allow money to gather dust on accounts instead of being put to use.

We are especially concerned by the financing of federal programmes. Only 300 billion out of the 1 trillion roubles allocated for their fulfilment, or slightly more than 28%, have been used. The standards of using money, or rather, letting it gather rust, are more or less the same as last year. This promises that there will be some emergencies at the end of the year, which will have a bad effect on performance standards.

I’d like to remind you that at a government meeting in mid-June, I issued instructions to determine who will patch holes in the fulfilment of targeted and recipient-oriented investment programmes. I would like to hear today what has been done to improve the situation. I hope that the report on the implementation of the federal budget and the fulfilment of targeted federal programmes and the recipient-oriented investment programme in the first nine months of 2012 will present a different picture, although this seems like a chronic, perennial disease.

The second issue we will discuss today has to do with the allocation of subsidies to the regions following the implementation of regional compatriot resettlement programmes that have been included in the government programme. In all, allocations for these purposes this year are set at 200 million roubles, 60 million of which have already been distributed. Today we should approve the distribution of the remaining 140 million roubles among 38 regions. These funds will be used to create conditions for our compatriots who have moved to these regions from other countries, in particular to compensate their travel expenses and to pay them lump-sum relocation allowances. Clearly, many of our compatriots would like to move to Russia, but when they make this decision they wonder whether they will be welcome here. They must be confident that they will find a job and that their children will be able to attend schools and kindergartens here. It depends on the regions to find effective solutions to these issues. They can join various programmes, including those that stipulate housing subsidies for those who are resettling. We want immigration flows to meet the economic development requirements of Russia and its constituent entities.

First of all, we would like to receive skilled specialists who are in high demand on the labour market. And, of course, it would be desirable to receive our compatriots, simply because it is much easier for them to integrate into our complex society. In reality, this is an extremely difficult task these days. I hope that federal support will enable the regions to more effectively implement relocation programmes.

The first item on the agenda has to do with the results of executing the federal budget in the implementation of the federal targeted programmes and the federal recipient-oriented investment programme during the first six months of 2012. We have two speakers, namely, Deputy Minister of Economic Development Oleg Savelyev and Minister of Finance Anton Siluanov. Please, colleagues, you have the floor.

Anton Siluanov (Minister of Finance): Mr Medvedev, colleagues. I will be submitting a report on the implementation of the federal budget during the first six months of 2012 for your consideration. My presentation contains all the main parameters highlighting the implementation of the federal budget.

Indeed, the total index of the physical GDP volume grew by 4.4% during the first six months of 2012. This parameter decreased to 4.2% in January-June 2012, although our budget forecast, which was used to calculate specific budget parameters, stipulated a 3.4% increase in the index of the physical GDP volume. In effect, we have exceeded our own forecast. Consequently, we still manage to accumulate surplus revenues associated with higher economic growth rates. We will post a 4.5% inflation rate during the first six months of 2012. Since early 2012, nationwide inflation has matched our forecast. Consequently, we will keep an eye on consumer price hikes, which influence budget revenues and expenses.

And now, I would like to say a few words about specific factors directly influencing budget parameters. This includes average REBCO (Russian Export Blend Crude Oil) prices. Our revised budget forecast stipulated $115 per barrel. The current actual price is $110.8 per barrel. Consequently, we are lagging somewhat behind the budget forecast. As a result, we are posting certain oil and gas revenue shortfalls. At the same time, the rouble’s exchange rate against the dollar has changed somewhat since our forecast. The initial exchange rate was 29.1 roubles to the dollar. The average January-September exchange rate was 30.9 roubles to the dollar, in line with the latest reporting date. Consequently, this provides us with additional sources of budget revenues and also facilitates additional spending, which is tied to the hard currency exchange rate.

I would like to say a few words about the main budget implementation parameters in the first six months of 2012. Take a look at Slide No 3. As we can see, federal budget revenues totaled 6.2 trillion roubles during the first six months of 2012. Budgetary spending totaled 5.93 trillion roubles. Consequently, we have posted a 270.7 billion rouble budget surplus. What is important to note here? This year’s oil and gas revenues accounted for 11.6% of the GDP, which is more than in the last five years. This is obvious, as there are fairly high crude oil prices. At the same time, non-oil-and-gas revenues totaled 10.7% of the GDP, or less than in the last five years. I would like to remind you that this parameter had totaled 11.2% of the GDP during the first six months of 2011; 10.9% in 2010 and 12.1% in 2009, respectively. We are still lagging behind in terms of planned non-oil-and-gas revenues, considering the 2012 budget’s targets. On the contrary, we are over-fulfilling budget targets in terms of oil and gas revenues.

I would like to talk about the implementation of budget expenditures. As for federal spending, we have considerably exceeded the level of the past few years during the first six months of 2012.

Execution of the spending side of the federal budget amounted to 46.3% of the annual plan. If you look at previous periods of budget execution for the first six months of the year, this figure stood at 41.4% in 2011, which is significantly lower than this year, 42.6% in 2010 and 39.2% in 2009. That means that high performance with regard to budget spending is primarily due to the implementation of Law No. 83 and the transition to financing public institutions through government orders and subsidies.

Allow me to say a few words about revenue generation. Analysis of the contributing factors shows that, in general, we have an effective revenue-generation system, including revenue sources such as value-added tax in the amount of 1.735 trillion roubles, which is more than half of all non-oil-and-gas revenues. Mineral replacement taxes have made up a significant portion of revenue during the past six months as well. Oil production taxes amounted to 1.822 trillion roubles and gas production taxes were 135 billion roubles. Export customs duties on oil in the amount of 1.2513 trillion roubles are sizable, as well. These oil and gas revenues are primarily related to the external economic factors.

Going back to spending, you, Mr Medvedev, have already identified a number of ministries and departments that are late in meeting their respective spending commitments.

The limits of budgetary commitments that have not yet been approved (no decisions have been taken in the absence of corresponding regulations and, therefore, the specific recipients have not received the funds), now amount to 31.2 billion roubles. The Ministry of Agriculture, the Ministry of Regional Development, the Ministry of Transport and the Federal Road Agency have the largest amounts of such unpaid limited budget allocations due to the absence of regulations. Nevertheless, this year the situation is still significantly better than during the same period last year. This year, we have made 84.6% of the total yearly amount of limited budget allocations available to subordinate organisations whereas this figure was 81.6% in 2011, meaning that the situation is improving. Of course, we should strive to make such funds available in a more timely and comprehensive manner in accordance with the budget law.

Now, I would like to say a few words about the upcoming assessment of federal budget execution in 2012. We expect this year’s budget to be implemented in terms revenue in the amount of 12.675 trillion roubles. This figure is almost equal to the level of the revenue that we indicated in the last revision of the budget law in June. As for expenditures, we expect them to be executed in the amount of 12.8178 trillion roubles. So far, we have come up with the calculations of the estimated budget deficit in the amount of 142.8 billion roubles, or 0.2% of this year’s GDP. In general, this is almost in line with the revised budget numbers that we have adopted (the bill was passed on June 5, 2012), with the budget deficit at 0.1% of GDP. However, we are still concerned about persistently high non-oil-and-gas deficit, which, according to our estimates, will reach 10.7% of GDP this year, which is significantly higher than last year. So, beginning next year, we will continue working on implementing budget rules, limiting our expenses and holding the line on spending.

Colleagues, we will need to spend 4.9521 trillion roubles, or 38.6% of the revised budget allocations, before the end of 2012. This amount is set forth in our cash plan and in public contracting terms. Therefore, I would like to remind the main administrators that they need to perform proper measures with regard to cash expenditures in accordance with the cash expenditure forecasts compiled by you and make sure that the spending is not put off until December. As you are aware, the largest amount of spending usually falls in December, particularly its last two weeks, which certainly affects the money market and the inflation, especially early in the year that follows the reporting year. Therefore, please focus on the organisational issues relating to the federal budget execution in 2012. If there’s a need to amend the consolidated budgetary allocations for 2013 and 2014 in order to be able to execute the 2012 budget, then make these amendments soon. In accordance with established procedure, the amendments to the 2013-2014 budget allocations will be made by the Finance Ministry upon the proposal by the ministries and departments until September 10. Please note it.

Secondly, the Finance Ministry informed the administrators of the main budgetary funds that drafting a federal law on amending the 2012 budget law will begin in September. Therefore, the main administrators should, before September 9, submit to the Finance Ministry balanced proposals regarding the redistribution of federal budget allocations for 2012, unless such changes can be made during revisions of budgetary allocations. This is important because we will soon have to update 2012 budget proposals and your proposed amendments and the expenses that cannot be financed should be submitted to the Finance Ministry in due time.

In addition, the main administrators should analyse their spending during the previous period and see if there are ways to save and if there are any unused balances.  This will make it possible to amend this year's budget and reallocate these appropriations for a more effective use, which we will define as a priority during the current year. Therefore, this work should be completed quickly so that we can have the revised budgetary proposals in September 2012.

Thank you. That concludes my report.

Dmitry Medvedev: Thank you, Mr Siluanov. Please take a seat.

Oleg Savelyev (Deputy Minister of Economic Development): Mr Medvedev and colleagues, 55 federal targeted programmes will be funded from the open portion of the budget in 2012 in the amount of over 1 trillion roubles. The federal recipient-oriented investment programme includes (without account of defence contracts) more than 3,500 facilities, of which 1,340 will be commissioned this year. Funds allocated for the implementation of the federal recipient-oriented investment programme amount to 925.4 billion roubles, of which 324 billion will be used for construction projects and sites that are not included in the federal targeted programmes.

The exhibits for the government meeting show a set of conventional indicators used in evaluating the implementation of federal targeted programmes. The first indicator shows the share of contracts made to implement federal targeted and recipient-oriented investment programmes. The chart compares this year’s average with that of the past year, as well as the 10 best and 10 worst FTPs in this respect. By tradition, excellent performance has been demonstrated by the Ministry of Industry and Trade – both on the destruction of chemical weapons, the sub-programme of the FTP National Technological Base, and diesel engine making; the Ministry of Agriculture has always done a good job on the social development of the countryside and other programmes. I’d like to make a special mention of the excellent implementation of the programme on the Far East and the Trans-Baikal Region. This is primarily linked with the fact that this year major allocations were channelled into the preparations and hosting of the APEC Leaders’ Week, which is underway in Vladivostok. I’d like to thank the Ministry of Regional Development and Mr Shuvalov personally, who was supervising these preparations round the clock.

I’d also like to note the problems that contractors have encountered on a number of FTPs. In the first six months of this year, no contracts at all were signed on several FTPs, for instance on the State Frontier, Clean Water and others that had problems with the preparation of documents and decision-making on the distribution of funds. It goes without saying that no allocations could have been made on these programmes for lack of contracts and, at best, some measures were carried out on raised funds or were co-financed. 

Co-financing has become much more widespread this year than before. This largely reflects the state of regional budgets as well as crisis or pre-crisis apprehensions of private companies whose financing is linked with projects under the FTPs. Its level has increased from 16% in 2011 to almost 37% now. Several FTPs were adjusted and many unjustified expenses on co-financing removed from them. Broader co-financing primarily comes from the active participation of local budgets in implementing FTPs and guaranteed co-financing by state contractors.

I’d like to mention again the FTP for the Far East and the Trans-Baikal Region, the Ministry of Agriculture with its FTP to preserve soil fertility and the Emergencies Ministry with its fire safety FTP, where the main expenses are financed by the regional and federal budgets. Let me also repeat that no co-financing has been arranged on the Clean Water programme or the recently approved FTP on protection of Lake Baikal.

The FTP funding from the federal budget is a bit lower than last year. I’d like to mention four programmes on which no funding has been started – the State Frontier, Clean Water, State Aviation Safety (contracted by the Defence Ministry) and the War Memorials FTP that has not been endorsed although the federal budget has allocated 0.5 billion roubles on it.

As of September 1, only two out of the delayed FTPs demonstrated the required progress, dismissing apprehensions about their implementation this year – GLONASS and the Development of the Water Complex. An analysis of the reasons of why some FTPs are lagging behind revealed that there have been delays in endorsing the required papers for announcing tenders and receiving funds.

As for the implementation of the federal recipient-oriented investment programme (FROIP), I’d like to note the following problem. Let me recall that FROIP blocs the funds for the construction of facilities if the relevant design and cost estimates or the documents for the start of funding were not presented by the time of its endorsement. A total of 138 billion roubles were blocked this year. Until April 1, the government had the right to channel these funds into other projects and some of them were transferred. However, as of today, 37 billion roubles for FROIP are still frozen. This money is intended, among other projects, for five projects of the Energy Ministry, three of which are power supply facilities in Sochi to the tune of 5.9 billion roubles; several projects under the Electronic Component Base programme of the Ministry of Industry and Trade worth a total of over six billion roubles, a number of projects of the Ministry of Sport and the like.

In conclusion, I’d like to saw a few words about what the Ministry of Economic Development cites as the main reasons behind the failure to fulfil the tasks set by the government during the endorsement of FTPs and to implement the projects that are not part of FTPs. In addition to the poor performance of state contractors, which has been and will be discussed regularly, there is also a number of system-wide problems that are largely the result of the gap between the tasks set during the approval of these projects on the one hand and the resources for their implementation and the relevant activities of state contractors, on the other. In many cases, this relieves state contractors of responsibility for the projects. In some cases they even redistribute the funds for what they consider more urgent requirements than those they themselves submitted for our consideration after we discussed them all together and the government approved them as major national projects.

This is largely linked with restrictions on short-term contracts that considerably upgrade contracting, funding and implementation of construction projects and measures envisaged by the FTPs. In many respects, this is linked with the consequences of the changes effected in 2009-2010 as part of the measures to counter the world financial crisis. This practice is still in use and sometimes it is initiated by state contractors.

Dmitry Medvedev: What do you mean? I don’t get it.

Oleg Savelyev: The Budget Code provides for an opportunity to sign long-term contracts for the entire period of their implementation on many projects. However, the changes that are being continuously introduced into the funding parameters for the current year and the Law on the Budget for the entire planned period necessitate permanent adjustments of normative legislation. They make it impossible to sign a contract, say, on the GLONASS programme for satellites that will be put into orbit in 2015 or 2014 because the adjustments to the 2014 budget were made on condition of return to the funding of this last year of the planned period at the next budget cycle.

Dmitry Medvedev: I didn’t get it – what does the crisis have to do with this?

Oleg Savelyev: We launched this practice of changing the parameters of government-endorsed FTPs in the budget during the crisis when we had to release some resources. It was logical to withdraw the bulk of these resources (up to 40% of all investment expense) from the federal targeted programmes and the federal recipient-oriented investment programme.

Dmitry Medvedev: I see. What do you suggest on this issue?

Oleg Savelyev: We believe it is necessary once again to start adjusting federal targeted programmes, depending on the budget parameters. As for high-priority programmes, including “GLONASS,” “Space Exploration” and others, which are officially prioritised, the Law on the Budget should reflect financing parameters and should modify these parameters only if such programmes are not fulfilled. In addition, various penalties should be stipulated for failure to implement such programmes. This will make it possible to sign long-term contracts for the entire duration of the budget’s implementation, as well as long-term contracts exceeding the planning period, as stipulated by Article 72 of the Budget Code, and consequently to reduce the load from the constant adjustment (in some cases two or three times a year) of federal targeted programmes which is taken by state clients as well because federal targeted programmes are approved by a governmental resolution.

Most problems regarding initial funding are linked with the delayed approval of federal targeted programmes. This means that federal targeted programmes should be approved in line with the 594^th Law prior to the enactment of the Law on the Budget. And this means that, on the contrary, the law on the budget should reflect the government’s decisions. And we should not start approving federal targeted programmes following the approval of the law on the budget. For instance, the relevant programme concerning Lake Baikal was approved in the summer of 2012, although the relevant decision on this programme was made and drafted back in 2011 in line with regulatory documents, as planned.

The same can be said about the initial and subsequent implementation of the budget and specific decisions regarding construction of facilities in accordance with federal targeted programmes. In this regard, we face a multitude of amendments which must be introduced into regulatory documents, as well as current documents ensuring the implementation of the budget. I would like to remind you that a highly important programme was approved in its time. That programme, which stipulated the de-bureaucratisation of investment-related spending, was approved on the joint initiative of the Ministry of Economic Development and the Ministry of Finance. The document made it possible to include larger-scale projects in federal targeted programmes. Consequently, there was no need to amend federal targeted programmes during the financing of some projects at the expense of others.

Another procedure for approving specific federal targeted programmes was laid out, making it possible to reduce deadlines for the introduction of the necessary amendments by four to five times and, in some cases, by 10 times compared with the previous period. However, numerous additional legal grounds for making amendments subsequently appeared, including those regarding the Federal Selective Investment Programme and the combined budget revenues and expenditures. This happened as usual because Russian bureaucracy is invincible. More than 2,500 amendments needed to ensure initial funding were introduced into the Federal Selective Investment Programme throughout 2011. The Ministry of Economic Development, which is responsible for approving such amendments, estimates that no more than 300, or 500 amendments at most, were linked with genuinely essential changes. The latter were facilitated by the need to modify financial or investment parameters regarding specific construction sites and projects.

I have here an entire folder containing various examples of instances in which it took about three months  for shuttling between  the Ministry of Economic Development and the Ministry of Finance to coordinate the transfer of 7,000 roubles for contract supervision purposes (without any changes in the cost estimate or project-opening deadlines). Such red tape was necessary in order to authorise this spending. Of course, we need to abandon this practice and convert to the extremely simplified introduction of amendments, by agreement with the Ministry of Finance and the Ministry of Economic Development, to the Federal Selective Investment Programme over a period of ten days. Actually, we had launched this process in 2010.

Dmitry Medvedev: What do we need for this?

Oleg Savelyev: Well, this demands certain technical issues. As usual, the devil is in the details. This is connected with the fact that maximum budget obligations require new types of expenses, which inside …

Dmitry Medvedev: Please don’t tell me about the devil in the details now. What do we need in order to convert to this concept of work?

Oleg Savelyev: Specific expenses for buying out land plots within the format of cost estimates should not differ from design expenses stipulated by the same cost estimate, with regard to one and the same facility, during the finalising of expenses and the combined budget revenues and expenditures. Obviously, everything can be accomplished, not during the planning stage when all these changes will have to be coordinated with the Ministry of Finance and the Ministry of Economic Development, but rather during the payment stage when all these parameters are listed in the payment document. This will make it possible to accomplish specific objectives of the Ministry of Finance during the registration and separate accounting of these different expenses regarding land plots and, in some cases, wages. Consequently, the entire registration and accounting policy will be retained. As I have already said, these simple measures can reduce the number of amendments that are needed to implement the Federal Selective Investment Programme by five times.

Dmitry Medvedev: I was talking about what should be done in the sphere of regulatory documents, to make it possible to launch the proposed procedure.

Oleg Savelyev: This implies orders of the Ministry of Finance. As of today, the Budget Code lists the budget classification, except the top two sections, among the powers of the Ministry of Finance. Consequently, the relevant procedure for keeping the combined budget revenues and expenditures and the application of the budget classification are determined by regulatory orders of the Ministry of Finance within the framework of their authority.

Dmitry Medvedev: All right. Is that all?

Oleg Savelyev: Yes.

Dmitry Medvedev: Thank you, Mr Savelyev, please sit down. What does the Ministry of Finance plan to do about this?

Anton Siluanov: Mr Medvedev, in reality, we advocate the approval of all federal targeted programmes and decisions on financing investment expenses, before submitting the draft budget to the State Duma. This is obvious. Consequently, I support the relevant proposals of the Ministry of Economic Development.

As for issues regarding simplified registration, accounting and the simplified budget classification being proposed by the Ministry of Economic Development, we simply need time to examine this issue along with the Ministry of Economic Development, the concerned ministries and departments, and to submit the relevant proposals, as it would be incorrect to discuss them verbally. Mr Medvedev, we will therefore examine these proposals, and we will brief you on the position that we arrive at together.

Dmitry Medvedev: Please examine them, because this permanent problem cannot be solved by incantations or strongly-worded statements. There have always been many problems with implementing the federal budget and the Federal Selective Investment Programme. Numerous adjustments are made all the time, but this does not mean that we should not improve this procedure.

So, we have agreed then. The Ministry of Economic Development will coordinate the relevant amendments with the Ministry of Finance, and it will submit these changes to the government for consideration. Are there any questions for the speakers? Everyone is quiet, especially those who have trouble implementing a federal targeted programme.

Oleg Govorun (Minister of Regional Development): I would like to make a report.

Dmitry Medvedev: Go ahead.

Oleg Govorun: Mr Medvedev, the Federal Targeted Programme “Clean Water” was listed among those programmes that are lagging behind. Indeed, we have failed to implement it during the first six months of 2012. This is due to the fact that state support is provided in line with the required tender, which was completed in July. The government’s directive of July 14 approved the allotment of subsidies. As of September 5, the relevant contracts and funding were worth 2.7 billion roubles. This makes up for over 90% of the approved funding volumes.

Dmitry Medvedev: Frankly speaking, this is the consequence of what we are talking about. All right. Would anyone like to make additional remarks on the reports or say anything about the federal targeted programmes? If not, then let’s make a decision on the results of implementing the federal budget, federal targeted programmes and the Federal Selective Investment Programme during the first six months of 2012 in line with the results of the discussion.

The next item of our agenda deals with approving the distribution of subsidies that are allotted to regional budgets for the implementation of regional programmes. Mr Siluanov will also speak on this issue. Please.

Anton Siluanov: Mr Medvedev, colleagues. The Federal Law on the Federal Budget stipulates the allocation of subsidies to Russian regions for the implementation of regional relocation programmes under the state programme to facilitate the voluntary relocation of compatriots living abroad to the Russian Federation. The total sum is 200 million roubles.

The government’s draft resolution proposes approving part of the subsidies worth 140 million roubles in line with the results of the implementation of regional relocation programmes included in the state programme to facilitate the voluntary relocation of compatriots living abroad to the Russian Federation, as of July 1, 2012. I would like to remind you that the government has already examined the first part of the planned budget sum, and we have decided to distribute this sum among Russian regions. The subsidies are allocated to regions implementing relocation programmes, which have been approved in line with the established procedure. The subsidies are distributed among Russian regions, depending on the actual number of compatriots who have relocated from July 1, 2011 until July 1, 2012, and depending on the level of the regions’ estimated budget volumes.

In all, 34,372 compatriots have relocated during the above-mentioned period. As of July 1, 2012, 74,448 of our compatriots have relocated including 29,866 people relocated in 2011. Judging by the distribution results and proceeding based on this number, 38 Russian regions will receive subsidies. I ask you to support this proposal.

Dmitry Medvedev: The report is brief, and this is its merit. Are there any objections to supporting this distribution of subsidies? No? Shall we support this? All right, it’s settled then.

Anton Siluanov: Thank you.

Dmitry Medvedev: Thank you, Mr Siluanov.

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