State Council deputies on Tatarstan’s budget: ‘The factor of uncertainty is compared to the year 1991’

“The outlook must create a necessary safety margin”

All deputy commissions had heated debates on the budget’s project for 2021-2023 on 20 October, which included big uncertainty for the national economy due to the coronavirus pandemic. The deputies didn’t hide that it would unlikely be possible to make an accurate outlook for 2021 because of the unpredictable economic situation. In these conditions, the republic’s Ministry of Finance occupied a firm position by creating the budget only for basic needs cutting off secondary costs from the treasury.

The hearings opened with the presentation of a detailed outlook on socioeconomic development at the morning session of the Committee for Economy, Investments and Entrepreneurship. “The outlook must иу as realistic, working as possible and create a necessary safety margin,” noted the committee’s Chairman Lutfulla Shafigullin in his welcome speech. “To not only perform current tasks but also endorse long-term trends”. According to him, in uncertainty “it is necessary to support sectors that provide the maximum effect” but not go to extremes.

Tatarstan Minister of Economy Midkhat Shagiakhmetov who was invited to the session repeated the report on the outlook for socioeconomic development that was made public for the first time on 11 September word by word. It seems that nothing has changed in the last 1,5 months, though, of course, this isn’t true. This time he mentioned three key moments. Firstly, macroeconomic indicators will turn out restrained. GDP’s growth pace in 2021 is forecasted to be at 103,9%. It is expected we will come back to the pre-crisis GRP level in 2021, which at the same time will exceed the level of 2019 by 46,7 billion rubles. The Ministry of Economy waits for the growth of economic activity in 2021-2023 to happen thanks to a rise in industrial production and commerce providing more than half of GRP’s growth in 2021.

Secondly, the growth of investment in working capital is planned to at 104,5%. The mechanism of PSEDA (Editor’s Note: Priority Social and Economic Development Area) that functions in five monotowns of the republic is to become one of the tools. “The institution of PSEDA proved its efficiency: the amount of payments to all budget levels and extrabudgetary funds is almost twice bigger than the sum of provided tax preferences. Over 22 billion rubles of investments are expected to be attracted during the forecasted period,” the Ministry of Economy calculated.

Thirdly, the Ministry of Economy expects a rise in consumption. “The growth pace of the retail commerce turnover is predicted at 102,1-102,5%,” said Midkhat Shagiakhmetov. According to the outlook, the turnover of small and medium-sized enterprises in 2023 is to be about 1,7 trillion rubles (1,5 trillion rubles in 2019). Vice Minister of Finance Alla Anfimova delivered a speech in tandem with the economy minister and repeated parameters of the budget’s project for 2021-2023.

Economy Ministry: “We already optimised non-basic expenses”

However, the deputies appeared to be disappointed with a hurried report with numbers without clear explanations about what we left and cut. “The report isn’t read and heard,” Roman Mugerman from KAMAZ said with displeasure. “Why do you need these billions and millions? You could have compared it with last year. It is useless,” he expressed the audience’s general mood. “Tell me what exactly will save on next year?” he asked directly. In reply, Vice Minister Alla Anfimova continued speaking a dry language but didn’t anyway provide a full explanation. However, she gave the audience to understand that everything not considered as basic needs was sequestered.

“We already optimised non-basic expenses when creating the budget for 2021-2023,” she explained. Having chosen this unclear and artful formulation, the vice finance minister managed to craftily disguise everything that’s hidden behind the word “unnecessary”. According to her, the budget will prepare to fall short of scheduled incomes, but priority measures will be financed. After hearing an evasive reply, Roman Mugerman closed the useless dialogue like a gentleman. “I see,” he pronounced gloomily. “The Ministry of Finance will send you a written reply,” the head of the committee rescued the lady from the Finance Ministry.

However, Vice Speaker Marat Akhmetov hoped for lively dialogue and decided to ask head of the Chamber for Industry and Commerce Shamil Ageyev if he agreed with the Economy Ministry’s outlook that SMEs’ turnover in 2021 would rise to 1,7 trillion rubles. “If you want to know my frank answer, now standard approaches work, while non-standard solutions are needed. The existing situation can turn everything upside down,” Mr Ageyev evaded the talk offending the interlocutor. “Your answer is like the answer of that person from the Jordan riverbank,” Mr Akhmetov joked and switched to asking the head of the Economy Ministry questions. He didn’t believe that agriculture in 2021 would show 120% growth compared to last year. “Does the Ministry of Agriculture confirm these numbers?” he asked with mistrust and calmed down after receiving an affirmative reply.

Will there be lay-offs at Kazan Aviation Plant?

Deputy Marat Galeyev instructed the Ministry of Industry and Trade with checking possible lay-offs at the Kazan Aviation Plant. “Information about further lay-offs has appeared in the media these days (he’s talking about the Kazan Aviation Plant). “It is necessary to comment on this. If we start losing staff, it will be hard to return it. If we don’t receive a detailed answer, we would like to hear explanations at the session,” he addressed the vice minister of industry and trade of Tatarstan.

“The aviation complex is the image of our high-tech mechanical engineering. This sector hasn’t found its feet yet since the 90s and hasn’t reached good, profitable performance except for several good years. And now the situation is concerning. They don’t work for the free market: they build if there is an order, they stay idle if there is none. The aviation complex is especially dependent on orders. While scarce plants can’t provide profitable performance. Kazan Helicopters has serious lay-offs compared to its best years,” Marat Galeyev urged the ministry to take the situation under control.

What is SME’s pulse?

Lutfulla Shafigullin asked if we could say the situation in Tatarstan with affected small businesses was similar to the general Russian situation or was worse. The Tatarstan economy minister answered that SMEs in Tatarstan suffered as much as across the country — not better, not worse, but targeted measures helped avoid a systemic crisis. Those who were thrown overboard of federal support due to the unsuitable Russian National Classifier of Types of Economic Activity received the republic’s help. “They received 2 billion rubles of support from the republican budget,” said Shagiakhmetov. “The primary task is not to simply hand out money but to make sure the support reaches needing entrepreneurs,” he expressed the ministry’s position on financial support distribution.

Roman Mugerman examined the report of the Economy Ministry. “Considering that the ruble devalued by 25%, our investment growth outlook is just 5%. Do I understand correctly?” he asked the head of the Ministry of Economy. It was hard for him to disagree, in fact. But the economy minister got out of the complicated situation. “There is a special regulatory document that regulates the formation of the number of investments in working capital. We deliberately held seminars with our enterprises and municipalities within the taskforce and will explain to them how this is done. If needed, let’s meet with you too,” Shagiakhetov offered to the searching deputy. In response, Roman Mugerman sighed heavily and refused the seminar. “Prepare him a written answer,” Lutfulla Shafigullin backed the speaker.

How Yegor Gaidar was mistaken five times

In conclusion, they returned to what they started with. Oldest deputy Marat Galeyev reminded the audience how dangerous it was to rest on outlooks of a fighter against hyperinflation Yegor Gaidar. “The factor of uncertainty is compared to the year 1991,” Marat Galeyev noted. “When we presented the budget for 1992, the biggest price growth outlook Yegor Gaidar made was five times. While we calculated 15-fold growth of prices in our budget, and Gaidar told us: ‘Don’t play the fool, it won’t be above five times’. In the end, prices grew 26 times. So this is how the outlook, vision of the federal management was incorrect during those years. But it is no surprise, in fact, it was a revolutionary situation. But the factor of uncertainty is big now. We can’t require absolute accuracy here. Nevertheless, we can’t live without forecasts.”

To sum up, the Cabinet of Ministers was recommended to expand measures of state support for export, effectively use federal and regional institutions of development, improve supporting mechanisms for big investment projects.