“The main challenge for us is the reduction of the budget deficit”
— You are on the forum said that the Finance Ministry has an ambitious goal to minimize the budget deficit, to reduce it to less than 1% of GDP. How to do it?
The President, speaking at the St. Petersburg forum, said that it is necessary to ensure macroeconomic stability. Beyond these generalities there is a question of the budget deficit. A big deficit is an indicator of unsustainable cost structures. Why? When we had accumulated large reserves, the source of funding served as a Reserve Fund. The question for investors: what will happen next, how the country will Finance the deficit? Aggressive surround borrowing on the domestic market or raising taxes? What is a large borrowing on the market? This pressure on the market and raise interest rates in the economy. Then to lower interest rates on loans, the reduction of inflation even can not speak. So now the reduction of the budget deficit is a key task. If we spend more than 2 trillion rubles from the reserve funds to Finance the deficit, then next year we have no such opportunity. We must maintain a “safety cushion”, we are unable to spend all of our reserves. Otherwise, our financial and budgetary policy will be vulnerable.
— According to statements of the Ministry of Finance, on June 1, the Reserve Fund had 2.5 trillion rubles…
— So. So next year we will need more to enter the market. If this year we have a net borrowing on the domestic market will be about 300 billion rubles., then in the next it could rise to $ 1 trillion or more. How will this affect the market? Will we have to more aggressive participation in the market to move to short-term borrowing? Not all banks in such large borrowing would be willing to invest in 10-15-year bonds of the state. They will say: “given our capital and risks is preferable for us short of paper.” The risk to slide into t-bills — as it was some time ago — is one of the key risks, so we are talking about the need to reduce the budget deficit. Given the reduced opportunities for reserves to Finance such a large (though 3% of GDP) budget deficit by raising domestic borrowing is a big risk. In addition, borrowing is still expensive. Right now the yield on our bonds is about 9%. It is not 0.1—0.2%, as in the West. Say: “Think of it, a large amount of deficits. Let Russia do the same. Why can’t you help the economy, increase spending, increasing the budget deficit?” Including the fact that we have a long way. If we take 100 rubles 9 rubles next year will need to provide in the expenses. In terms of when revenues are down and more borrowing, we will have all the other costs can be reduced in favor of interest. Accordingly, the maneuverability of the budget dramatically reduced. But most importantly, it is necessary to reduce the budget deficit as a source of financial instability. Today we heard: “give more spending from the budget will be spent on investment, increase the deficit, nothing to worry about”. It is not necessary to do so, because the investment which our economy needs is private investment. And that was private sector investment necessary for growth, we need the stability of the macroeconomic situation. So the Ministry of Finance in this case pursues the economic goal — a strong advocate of promoting economic growth through a balanced budget policy, the stability of fiscal rules.
“Airbag” must stay”
— Sound ideas about what to cover the budget deficit may be the means of Fund of national well-being. There is some dissonance: all tend to think that FNB is spent on infrastructure projects, supporting the economy, and generally these funds return. If they really will be involved to cover the deficit, you do not have to change the rules of use of the NWF?
— The NWF and the Reserve Fund resources, which were created due to excessive oil and gas revenues. I remember the Finance Ministry blamed for the fact that he put in a jug”. Now those critics are probably overestimated their statements. Due to the fact that we have invested oil and gas revenues in the securities of foreign States — albeit low-yielding but liquid — we thus saved the proceeds are received. First, in connection with changes in the exchange rate in rubles, we got much more than if invested in ruble-denominated instruments. Second, of the ruble denominated instruments have yet to come out. If we need funds, we will not be able to get out of the ruble of the projects in which it has invested. These are infrastructure projects, they will bring out only a few years, and this investment is long. That is, investments in highly liquid foreign assets was absolutely the right decision. So do other countries that depend on market conditions and the resulting windfall to send to the same assets. As for the NWF, to 60 per cent of the money we can invest in infrastructure projects. The remaining portion is means which can be used as a Reserve Fund to Finance budget imbalances. Next year we have the budget plan will be about 1 trillion rubles of the Reserve Fund, and if we need to attract additional resources from our reserves, I don’t see any risk if we are part of the funds remaining from the national wealth Fund, not used for projects used for financing the budget deficit. But again, that “safety cushion”, which will be kept in highly liquid assets should remain because it is the stability of our financial and fiscal system.
— What part of the Fund can be used? Is there a ceiling that can be installed to use the NWF to cover the budget deficit?
— I think you need to focus on volume 1 to 2 trillion we should Have a stock of highly liquid assets. Next year, we’re going to talk about getting a privatization of money and how to use them to Finance the budget deficit. Thus, on the one hand, we are reducing the share of the state and attract private business to the management of our companies, on the other hand, get the sources for financing the budget deficit (the money is not going into revenues, and sources). Therefore, the total balance of our sovereign wealth funds will depend on including policies on privatization, which will be implemented next year. Now we will prepare the proposal taking into account the budget parameters that the government will consider.
“Thank God, the situation is changing in favor of the value of our companies”
In the beginning of the year was sounded the following figures: the budget will receive from privatization of about 800 billion — 1 trillion Now in June, prices change, market conditions change, and privatization is not started. The revised rates in terms of money?
— Thank God, the situation is changing in favor of the value of our companies, prices are rising.
But it does not change in favor of the presence of buyers.
— It’s not a quick process. Selected special companies that are engaged in the selection of investors and carry out the sale of our shares. All decisions were taken in the beginning of the year by the Russian government on privatization, remain. The first sale of 10.9% stake in ALROSA — we will see in the summer. For other, larger trades result we should see in the fall. The Ministry of economic development reports that the government business is in full swing.
— That is a landmark on the revenues from privatization are not yet revised in the direction of decreasing or increasing?
— We have identified a package that will be sold. If it will be sold at a higher price, so this year we will spend fewer resources, saving of backup media.
— How do you assess the chances of selling stakes in five assets, which was previously known [“Bashneft”, “Rosneft”, VTB, ALROSA, Sovcomflot]?
Is the task of the government, which was delivered to our colleagues from the Federal property Agency, Ministry of economic development. I believe that the task should be performed.
“The concept of protected and unprotected articles rather conditional”
— You at the St. Petersburg forum said: “When there is no money, do not want to spend”. You said that the money is there, we just spend it inefficiently. Now protected articles of the budget is social spending, defense, security. It turns out that under the knife are mainly investment costs. Are there any plans to revise the list of protected items, to add to investment costs?
— In the past the Budget code was written the concept of “protected articles” and a list of articles that apply to them. Now there is no such thing. We can only conditionally say that there is a protected costs. First and foremost, it is a social obligation of the pension. We can’t cut pensions and reduce those obligations which the state. And we’re not doing this because it is contrary to our law and our plans.
— It is possible not to index these payments as much as before…
— The question of indexation, as in the current year, is not to reduce existing commitments, and for new decisions on indexation of pensions. There are a number of costs which you can not refuse. There are a number of points that need to be taken in the current environment, responsible decisions. You can talk about more targeted, more efficient use of budget funds. For example, you can give subsidies to all companies that got in line. This principle, strangely enough, is used: first come, and he got it. Is it possible to estimate the effect of each ruble from the budget for economic growth. You can get a grant, providing additional economic growth. Then you can reduce the amount of subsidies, but to greater effect. The same goes for social spending. Now the results of these costs is based on the principle of categorization of citizens and beneficiaries. But not all of these categories of people are in need: some large property complexes, large salaries, there are millionaires among them. However, the government still spends money all the same. Right or wrong, fair or not?
— We are talking about targeted approach?
— About the targeting, Yes. Without prejudice to the fulfillment of the social function of the state, we can improve efficiency, and even to people who are now receiving welfare payments and benefits, we could pay more money due to the fact that someone payouts are in less demand.
— You mean the principle of means testing, which is already widely used in the regions?
— Of course.
— Will still be reduced investment costs?
— Need to improve the efficiency of investment spending. Often we have made decisions about the investment: the construction of buildings for institutions and so on — without regard for the subsequent maintenance of these facilities. When you look at the complex whether we have the resources and the construction and maintenance of these facilities, differently perceived the practicability of a proposed public investment.