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Sep 22, 2022
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Russia’s budget finalized with partial mobilization

The Cabinet of Ministers approved the draft new budget for 2023: expenditures, the structure of which is practically unknown, will exceed revenues by 3 trillion rubles. Mikhail Mishustin said that the Cabinet of Ministers “as quickly as possible” will work out the President’s instructions related to the financing of partial mobilization. However, the authorities do not plan to transfer the economy to mobilization rails yet. “At the moment, there are no such conditions,” said Dmitry Peskov, press secretary of the president.

The difficult situation in which the government found itself after the announcement of partial mobilization became apparent already on Wednesday evening. The item on the forecast of socio-economic development for 2023 and the period 2024-25 suddenly disappeared from the announcement of the meeting, and the head of the Ministry of Economics Maxim Reshetnikov disappeared from the list of speakers. This is the first time in the history of the Cabinet of Ministers that the forecast as a basis for the formation of the budget has always been heard as a separate issue.

The day before, speaking in the Federation Council, Reshetnikov argued that in the coming years, the Russian economy is expected to “accelerate adaptation” to the existing challenges. The forecast for a decline in GDP in 2022 was improved by the Ministry of Economic Development to 2.9%, for inflation – up to 12.4%, for a decrease in real disposable income of the population – up to 2%, for a reduction in investment – up to 2% (instead of 10.8%! !!). In the subsequent period, the agency predicted entering the trajectory of sustainable economic growth, reducing inflation to a target of 4%, increasing the welfare of citizens by about 3% per year, and increasing investment and consumer demand. However, apparently, these plans and figures were drawn up without taking into account partial mobilization, so they were not made public at the meeting.

Mikhail Mishustin said that the Cabinet of Ministers would pay “special attention” to “financing activities in connection with partial mobilization.” “The head of state instructed to take measures to meet the needs of our Armed Forces and military formations. In the process of finalizing the main financial law, it is necessary to take into account all the points that are important for the country,” he said. Even the approximate amount of funds needed to meet these needs, and their sources were not announced, but the prime minister believes that in general, citizens need to be told more about partial mobilization. He instructed Deputy Prime Minister Dmitry Chernyshenko, together with the Ministry of Defense and other departments, to organize information as soon as possible on the resources at their disposal, in particular on the Explain.rf portal. “So that every person can get answers to his questions,” Mishustin explained the purpose of the task set for the officials. (Recall that it is the government, according to the presidential decree, that must determine the categories of citizens eligible for a deferment and the procedure for granting it. In addition, people have a lot of questions for the military on the procedure for mobilization and participation in hostilities.)

The head of the Cabinet of Ministers spoke about the budget in an extremely streamlined way, avoiding specific figures if possible. The draft financial plan, he said, “combines the best solutions for the current situation.” Among the main priorities are the fulfillment of all social obligations and the financing of national projects. Mishustin said that from January 1, it is proposed to introduce a universal allowance for low-income families. However, these are not new payments, but the summation of existing ones. “It will combine a number of existing measures, including payments that are provided in connection with the birth or adoption of a baby and up to the age of three, as well as for children from 3 to 7 years old and from 8 to 17,” Mishustin said. It is obvious that the allowance will not have a uniform size for all, and it does not require additional costs. The purpose of the innovation is to systematize and more effectively administer the allocations for social support.

Budget revenues in 2023 were formed in the amount of 26.13 trillion rubles. According to Finance Minister Anton Siluanov, their growth will be ensured by “tax innovations”. Following the metallurgists, the energy sector will have to fork out: businesses are waiting for an increase in export duties on pipeline gas, the withdrawal of additional income from LNG producers, the introduction of an export duty on fertilizers and thermal coal, an adjustment of the MET for oil workers, etc. All this, according to Siluanov, is “a fair withdrawal of part of the natural rent.” However, non-energy entrepreneurs should not relax. “A number of other tax innovations are envisaged,” the minister warned cryptically. As for citizens, after these “innovations” they will inevitably face an increase in tariffs and a rise in the price of gasoline.

Budget expenditures next year will amount to 29.56 trillion rubles, but almost nothing is known about their structure (the Ministry of Finance has been secreting this data since the spring of 2022). Mishustin mentioned that about 3 trillion rubles will be allocated to finance national projects. (And this is almost a trillion less than previously planned.) Anton Siluanov, instead of numbers, described the upcoming expenses with the following words – “the necessary resources are provided”, “significant funds have been taken into account”, “support measures have been saved”, etc. The budget deficit is planned to be financed mainly through domestic borrowing. The use of NWF funds for these purposes will be minimized, and “in the ideal case” completely stopped. When the fund’s funds reach some unnamed level that ensures budgetary stability, the money, according to Siluanov, will be directed to the implementation of infrastructure projects. More specifics on budget expenditures should be expected when it is sent to the State Duma for approval. Deputies have been gushing ideas for a long time: one of the latest initiatives is to oblige the state to make monthly payments on mortgage and car loans for mobilized people.

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