Minister of Economic Development and Trade German Gref at a government meeting
Photo: Dmitry Azarov
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German Gref Stretches Out the Work on the 2006 Budget
// Minister of Economic Development didn't provide improved target programs on time
The budget process
The Ministry of Economic Development and Trade (MERT) was supposed to provide the government with a complete list of federal target programs (FTP) financed from the 2006 federal budget yesterday, but did not do so. In explaining the delay, MERT said there had not been enough time to work through all the details of the FTP. The Ministry of Finance was incensed at the missed deadlines for preparing the 2006 budget.
The main scandal during preparation of the 2006 budget occurred when the State Duma headed by Speaker Boris Gryzlov accused the government of being unwilling to use its investment resources for economic development. Next year, the government is planning to make all budget investments solely through federal target programs and the investment fund. Until recently, the government intended to allocate 287.2 billion rubles for FTP and another 70 billion rubles for the investment fund. However, the deputies believed that additional investment resources were hidden in the stabilization fund and the budget surplus. Gryzlov maintained that the government had understated the key parameters of the 2006 budget right from the start. Vladimir Putin intervened after Gryzlov presented Prime Minister Mikhail Fradkov with an ultimatum on June 7 that if the government was unable to propose investment projects, the Duma would do this itself. The result was in the tradition of compromise. The president informed Gryzlov that it was inadmissible to loot the budget, and ordered Minister of Economic Development and Trade German Gref and Finance Minister Aleksey Kudrin to refine the macroeconomic forecast and the key budget parameters.
The amended documents were on the desks of the president and prime minister on July 22 [see Kommersant of July 23 and 26]. GDP growth had increased from the initial 5.8 percent to 5.9 percent (within statistical error), and the average forecast oil price had increased by $5 from $35 to $40 a barrel. Another result of revising the macroeconomic parameters, according to Andrey Klepach, the head of MERT's macroeconomic department, was a 200-billion-ruble increase in state investments in the 2006 budget. Hence, the total amount of state investments, including the investment fund, could reach 550 billion rubles. Still another result of the review was an increase in inflation from the planned level of 8-10 percent to 10-11 percent. Nevertheless, MERT estimated that the increase in inflation due to the concessions to the deputies on state investments in 2006 was only 0.4 percent.
The Ministry of Finance believes it has found a compromise with the deputies. At the end of last week, Gryzlov openly declared that state investments must be increased to 600 billion rubles. He proposed spending money on additional financing for the mortgage lending system, on public health, education, development of the Far East and the Transbaikal region, housing for military personnel, reinforcement of the national borders, road construction and repair, construction of runways and ports, gasification, and agriculture. All of these lines of financing are in various subprograms of 50 FTP that the government approved in principle at its meeting on June 24. That, incidentally, was when Prime Minister Fradkov gave Gref a public dressing down for his inability to find an economic growth point. Now Gref has been ordered to allocate additional money among the programs. However, according to Kommersant's information, neither the government nor the Ministry of Finance has received the package of improved federal target programs.
Petr Netreba
All the Article in Russian as of July 27, 2005
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