OREANDA-NEWS. September 18, 2012. Issues discussed at the meeting included budget planning and fiscal discipline, balancing regional budgets and extrabudgetary funds, as well as ways to improve budget discipline.

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PRESIDENT OF RUSSIA VLADIMIR PUTIN: Good afternoon, colleagues,

Today we'll talk about the progress made on drafting the federal budget. I know how hard it has been, especially in the present circumstances, however, we are to summarise the results, even if only interim results, because the work on the budget has entered its final stage.

Yesterday, the Finance Ministry submitted to the Government the draft budget for 2013 and the following two years, up to 2015 inclusive. In the near future the budget should be reviewed and then submitted to the State Duma. Experts at ministries, various agencies and the Government have certainly accomplished extensive and serious work. The challenge was to resolve a number of interrelated tasks, to calculate the basic parameters of the budget taking into account the complex processes in the world markets and the general instability in the global economy.

I know that there were involved debates and discussions on a number of budget planning issues. In fact, it was the same in the previous years, and we all know it well. Today I would like to hear what decisions you have arrived at as a result of your discussions, but first of all I would like to draw your attention to some fundamental issues and approaches.

First, we should strictly abide by the policy of balancing the budget. Tough and responsible fiscal policy is paying off, and if it is not done properly, then the results are also tangible but their nature is completely different. All of us realise this and we know this from the example of many of our neighbours, especially in the Eurozone. Against the background of the problems with public finances in many European and other countries, the situation in Russia looks stable.

Last year, the federal budget was planned with a 0.8% surplus. In the first eight months of this year, the dynamics has been positive on the whole. At the same time, we have significantly expanded our reserves. The latest figures show that the Reserve Fund, for example, has increased by approximately 150% and reached nearly 2 trillion rubles [over USD 64 billion].

However, the non-oil and gas revenues deficit remains high: the figure is estimated at over 10% in the current year - 10.6% of GDP. We often return to this issue and we must admit that the potential risks are very high in this area.

It was in order to improve long-term budget stability and to strengthen macroeconomic stability that the new budgetary rule was adopted. It is envisioned to reduce the negative impact of the current fluctuations and create additional opportunities for budgetary manoeuvre: the accumulation of reserves.

This brings us to the second important task: the application of the budget rule limits the spending of the oil windfall, which is certainly reasonable and we have agreed on this many times. However, we must also take into account the key national objectives and the regions’ interests and needs, and properly evaluate our priorities in the economy, social policy – I am referring to pensions in particular – education, healthcare, culture, infrastructure, road construction, defence and security. Moreover, the fulfilment of our social commitments must remain a priority.

Please note that all the decisions have already been made, we have agreed on this on many occasions, the challenges have been identified in the Presidential Executive Orders, which I will talk about separately, and these tasks must be implemented, including the transition to a new, effective system of wages in the key budget spheres: education, healthcare, culture and science. These systems must be such that they encourage specialists and the management of institutions to improve professional standards and introduce structural adjustments, and to raise salaries for those who deserve it.

Next. As we analyse the federal budget, we must clearly understand what resources the major extrabudgetary funds will have, as I have already mentioned, in particular, the Pension Fund, the Federal Compulsory Health Insurance Fund, the Road Fund and others.

What date is it today? The 18th. And what have we agreed? That by the end of September the Government will submit written proposals on the development of the pension system. We haven’t received anything yet. How are you planning the budget for next year and the following years without addressing one of the key challenges facing the economy? We will talk about that today.

You must also pay special attention to the long-term budget planning. We need an idea of what the budget perspective is for the period after 2015.