Ayrat Farrakhov: “Our incomes in the next three years will outstrip our costs”

The budget of the Russian Federation for the next three years has been adopted with surplus for the first time in many years

Deputies of the Russian Federation adopted the federal budget for 2020 and the planning period of 2021-2022 in the third final reading. Deputy of the Russian State Duma from Tatarstan, member of the State Duma’s Committee on Budget and Taxes, ex-Vice Minister of Finance of the Russian Federation Ayrat Farrakhov said how the country would be developing in the next years during an online conference of Realnoe Vremya.

Budget adopted with surplus

Last week, the State Duma adopted the key document of the country in the third final reading — the federal law on budget in the next three years. It will soon be sent to the Russian president for signature. It should be noted that the budget has been adopted with a surplus for the first time in many years. According to Ayrat Farrakhov, the budget isn’t just the financing of enterprises and salaries of citizens, it is the key financial document of the country. The budget can be used to understand how the country will develop in the next years.

“We must form the budget in a way that the economy will have a process of development and commitments to the citizens will be met. Our income will be 3 times higher than our costs. However, why do some people remain poor and citizens’ incomes will grow just by 0,1% with such incomes? The case is that the structure of our incomes still significantly depends on oil and gas incomes. I will note that the price for our oil and gas resources is favourable now, but this factor is temporary,” the speaker said.

Farrakhov also reminds of the so-called budget rule when all incomes from oil products above a specific sum ($42,4 per barrel of oil) create the National Welfare Fund, which will be spent when prices for oil resources fall.

“This will enable the budget to meet all commitments to the citizens (at difficult times) even if oil and gas will cost nothing,” the deputy went on noting that it is the first and main task of the budget.

We must form the budget in a way that the economy will have a process of development and commitments to the citizens will be met. Our income will be 3 times higher than our costs. However, why do some people remain poor and citizens’ incomes will grow just by 0,1% with such incomes?

The second key task of the main financial document of the country, according to him, is to create conditions for non-oil and gas incomes to grow. So as of 1 November this year, the National Welfare Fund already accumulated 7,9 trillion rubles. Moreover, 7 trillion rubles are the untouched part of the fund, and all above it can be allocated for investments, according to federal legislation.

“Obviously, this money can’t be used for salaries. Repayment is the major principle of spending these subsidies. This money must be used in investment projects,” Farrakhov said about the investment part of the fund. The deputy put an example of the Norwegian Sovereign Wealth Fund (Norway is a country whose economy also depends on oil and gas price), which is replenished by investments in different foreign financial assets. This fund also invests in Russian federal loan bonds.

“Every citizen should feel the national projects

Talking about the federal budget for the next three years, Ayrat Farrakhov also paid attention to the fact that when adopting the federal budgets the deputies together with the government chose 10 regions that needed special help. It is needed to facilitate levelling the quality of life in all Russian regions.

“The long-term task for all regions and especially those that have a high level of subsidisation is to expand their own tax base by creating innovative enterprises, special economic zones, improving the business environment,” Farrakhov says.

Now enterprises have 18 trillion rubles. And nobody invests them. Everyone is scared that today you create a business, while tomorrow the situation changes, and the business has to go bankrupt

The tax burden was also mentioned. Nowadays the total tax burden of all Russian regions exceeds two trillion rubles.

“The deputies’ proposal backed up by the Russian government is a novelty of the federal budget approved by the State Duma — a region won’t repay the debt (taken out a loan from the budget) if this money is spent on investments. The federal taxes from these investments can be counted as repayment of the region’s debt. In general it is a positive decision that will allow lowering the level of debt and increase the volume of investments. Here is a simple example: now enterprises have 18 trillion rubles, they aren’t invested. On the one hand, there are few projects, on the other hand, there are a lot of different risks that in general form a corresponding business climate. The latest changes in federal taxes (VAT, income tax distribution) haven’t allowed businesses to feel comfortable,” Realnoe Vremya’s interlocutor says.

A set of bills introduced by the Russian government and aimed to protect and encourage investments can become one of the effective measures. According to Ayrat Farrakhkov, it will be considered in the next days after the regional week of the State Duma’s deputies. It is noted that the implementation of some national projects is delayed because money from the federal budget is late. However, Farrakhov adds that this won’t happen in the budget in the next three years. Absolutely everything has been distributed in 235 out of 245 transfers from the federal budget. This allows Russian regions to plan how this money will be spent right now.

“Every citizen should feel the national projects. And he will feel it when construction begins, equipment is purchased on a large scale, facilities are commissioned,” he said.

About development of countryside

The implementation of the project to develop rural territories will also be paid attention next year. According to the deputy, it will become a big infrastructure construction project aimed to bring the quality of life in the countryside closer to that in the city. The programme’s budget will amount to more than 38 billion rubles in the next years.

“Nowadays, 25% of the population of Russia lives in the countryside. Moreover, the number of people who really live in the countryside catastrophically goes down. The youth gradually choose cities. A lot of villages, settlements gradually disappear. This is, of course, a global tendency — urbanisation. This project was created considering the importance of rural territories to conserve a lot of national traditions, the language, customs and improve the quality of life in the countryside.”

Every citizen should feel the national projects. And he will feel it when construction begins

Not all Russians are ready to save money for older age

We should note that projects of law on budgets and three state non-budget funds were adopted simultaneously with the project of Russia’s federal budget for the next three years: the Social Insurance Fund, Compulsory Medical Insurance Fund and Pension Fund of Russia. The volume of money distributed through these three budgets accounts for about 12 trillion rubles.

“It is the payments that are prescribed within compulsory social insurance. In fact, all social commitments of the state are paid through these funds. What is important is that they are sustainable, the money will be transferred on time,” Ayrat Farrakhov noted.

Talking about compulsory medical insurance, Farrakhov said that the Russian Ministry of Health had reserves that would be spent to modernise primary health care. By spring the ministry should present a project of how a modern polyclinic should look like. During the talk, the topic of voluntary pensions and plans for creating a ‘guaranteed pension product’ were mentioned.

“The state offers citizens to transfer additional money (moreover, you get a tax deduction from this money). You have your own account that invests in investment resources in our country and creates an additional investment income. And a person gets not only insurance pension but the sum he accumulated when retiring at 65 years. This practice is accepted in all developed countries, therefore the pension is higher there.”

Nevertheless, not all Russians are ready to save for older age.

“We are very actively supporting the project of the self-employed. But the low rate is 4%, it is low because a person has to choose his pension plan himself. This is why we support when a citizen himself establishes the relationships with the Pension Fund. We offer the Central Bank not to impose a commission on voluntary payments to pension funds,” the speaker added.” For this purpose, together with our colleagues, we are preparing a special law.”

By Lyutsiya Kashapova. Photo: Rinat Nazmetdinov