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Govt to Go on Oil and Gas Diet
The Budget Message of President Vladimir Putin calls to complete budget and tax reforms in Russia in 2007. Finance Ministry is the obvious winner, as the president finally sanctioned the split-off of Stabilization Fund and limited budget spending of oil and gas revenues as the budget fundamentals.
The Budget Message of President that will determine the budget structure for 2008 to 2010 was promulgated past Friday. Arkady Dvorkovich, who heads the expert department of president’s administration, and Finance Minister Alexey Kudrin commented on the document in a few hours.
So, the key victory of Finance Ministry was the president’s agreement to divide Stabilization Fund and to limit the budget spending derived from the gas and oil revenues. For this purpose, Kudrin’s department made concessions, which are expected to ensure the future progress in reforms, while the policymakers dropped their politically-loaded requirements, including the progressive income.
In essence, this Budget Message appears very compromising. In president’s administration, Dvorkovich said, they leave to the government to decide whether to trim VAT from 18 percent to between 15 percent and 13 percent, replace it by the sales tax (which is advocated by Dvorkovich) or whether to keep everything unchanged till 2010 (which is Kudrin’s idea).
The key decision, i.e. re-creating the structure of non-oil/gas budget for 2008 to 2010 based on Kudrin’s proposals, has been taken in favor of Finance Ministry. The Stabilization Fund will be split into the Reserve Fund and the Future Generation Fund (FGF) already this year. The Reserve Fund that is to amount to 15 percent of today’s Stabilization Fund, according to Finance Ministry, is expected to ensure stability of budget spending in the environment of volatile prices for crude oil.
FGF will accumulate the revenues generated from the excess of oil and gas revenues over deductions to the Reserve Fund and the money deducted to finance federal budget spending. In the next move, some revenues of FGF will go to the budget, to finance the Pension Fund deficit, for instance.
www.kommersant.com
All the Article in Russian as of Mar. 12, 2007
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