Journal section "Socio-economic development strategy"

Passive behavior of the government. Budget problems are aggravating in the regions

Povarova A.I.

3 (39), 2015

Povarova A.I. Passive behavior of the government. Budget problems are aggravating in the regions. Economic and Social Changes: Facts, Trends, Forecast, 2015, no. 3 (39), pp. 39-55. DOI: 10.15838/esc/2015.3.39.4

DOI: 10.15838/esc/2015.3.39.4

Abstract   |   Authors   |   References
Despite a number of reforms, the current multi-level budgetary system does not fully correspond to the development strategy of the country and its regions. Still the Russian Government has not taken effective measures to address the main structural contradiction of the budgetary system, based on the non-adequate distribution of revenue and expenditure responsibilities, manifested in the sharp decline in the revenue base of territorial budgets during the 2009 global financial crisis. However, the crisis effects have not been analyzed and the conclusions have not been made. The Ministry of Finance of the Russian Federation tried to solve the problem of territorial budgets imbalance not by enhancing existing mechanisms of revenue distribution at the regional level, but by granting large-scale loans to be repaid after 2012. Despite it, due to the sharp rise in the social burden, the deficit and the debt load enlarged and resulted in the budget crisis in the regions. The experts of the Higher School of Economics state that 20 RF subjects, having the level of public debt above 80%, had been actually in default by the end of 2014. Instead of finding ways out of the fiscal crisis, the Russian authorities gradually lose overall control over the processes of regional development. The mechanisms of federal target programs work poorly and the RF subjects have to finance program activities. In fact, the management of territorial development is reduced to the transfer of financial resources from the federal budget to the regions and the Ministry of Finance of the Russian Federation regulating interbudgetary relations has, in fact, become the only real institute of regional policy. But the interbudgetary policy of the Ministry of Finance does not gain visible economic returns: in 2006–2014 the amount of repayable financial assistance to the regional budgets increased from 0.6 to 1.5 trillion rubles, and the number of selfsufficient territories decreased from 20 to 11. The worsening of socio-economic problems is accompanied by a difficult international environment, adverse effects of external sanctions against Russia and falling oil prices. Already in 2014 the losses from the sanctions amounted to 40 billion U.S. dollars, from the decline in oil prices 100 billion U.S. dollars . However, the federal budget for 2015 was approved without taking into account these factors. It demonstrates the inability of the Russian Government to accurately assess the situation and forecast events even in the short term. Due to forced significant amendments to the federal budget in April 2015, its deficit was increased seven-fold, from 0.4 to 2.7 trillion rubles. Surely, this imbalance of the country’s budget will seriously complicate the implementation of local budgets. In the new version of the federal budget transfers to regions cut by 72 billion rubles, or by 10.5%. The anti-crisis plan of the Russian Federation Government aimed at cutting budget spending provides not grant financial support to the regions, but allocation of budgetary loans in the amount of 160 billion rubles, which will be returned to the Federal Treasury. These funds will be enough to repay only 15% of the accumulated commercial debt of regional budgets. Such a short-sighted budgetary policy of the central authorities deprives the regions of any hope of solving the problem of rising public debt. The crisis, greatly affecting the regions with metallurgical specialization, has highlighted the limits of countercyclical potential of fiscal policy. The lack of budget risk management involves deep drop in tax revenues, a major revenue source of regional budgets. Another negative consequence is that the Vologda Oblast, the Lipetsk Oblast, the Chelyabinsk Oblast and the Kemerovo Oblast have lost the status of donor regions. The article presents the results of the research in the problems of budgetary provision of the Vologda Oblast, the Lipetsk Oblast and the Chelyabinsk Oblast, carried out by ISEDT RAS. The leading domestic corporations of ferrous metallurgy are located in these areas. The work evaluates the state of regional budgets, debt policy and interaction with the federal budget as of year-end 2014. The main accent is made on the analysis of relations between metallurgical corporations and territorial budgets. Despite the fact that the metallurgy-oriented regions are characterized by significant structural features, the estimates vary greatly in the territorial context. However, we can make a general conclusion that in these regions one can observe the growing problems connected with the receipt of tax payments from the key revenue generating industry since 2009. It entails a number of other negative factors of the regional budget systems functioning. Due to highly inefficient economic policies pursued by the central government in respect of the largest taxpayers, the regional authorities have completely lost the ability to regulate their economic activities


public debt, metallurgical corporation, regional budgets, income tax, public management efficiency

View full article