This is a routine event in many countries, but in Russia the endorsement of the country's main financial document is no passing matter and is traditionally accompanied by heated debates. In a sense, the adoption of the next year's budget is the focal event of the season.
There was a time when the Russian parliament held lengthy discussions on the budget surplus issue. Many deputies asked the question why the country with so many unresolved problems needed to save money. Then the problem of the Stabilization Fund arose. The deputies did not want to put money aside for the future. When the budget reform was implemented later, the country revised its policy on relations between the budgets of various levels....
The current budget structure has become customary for Russia. According to some estimates, the high revenues from hydrocarbons' sales provide 75% of state budget revenues. The Finance Ministry's opinion is, however, that the share of non-oil-and-gas revenues in the current budget is 48%, and in the 2007 budget it will rise to 54%. Nevertheless, hydrocarbons will continue to be the decisive budget revenue item. In fact, the country's present financial stability is based on the inflow of petrodollars. Russia has grown accustomed to this, and the deputies have got used to budget surpluses. The 2007 budget is calculated on the basis of a fairly high price of Russian oil ($61 per barrel) and the exchange rate of 26.5 rubles per dollar. Today, however, the price of Russian URALS oil does not exceed $58 per barrel, and most oil experts forecast a slight drop in oil prices in future. Nevertheless, at the preliminary parliamentary budget hearings, the Finance Ministry's officials assured the deputies that the main budget parameters would not be changed over the entire discussion of the budget in the Duma. In response, the MPs declared their readiness to produce the final draft of the budget by November 20. This will be a record for today's Russia: We still remember the times when the country started the New Year without its main financial document. Let us hope that these times are gone. As a rule, in the past several years, the parliament completed its work on the budget in December.
Thus the country will enter next year with the revenues projected at 6,965 billion rubles and amounting to 22.3% of GDP. Expenditures are projected at 5,463 billion rubles (17.5% of GDP). The budget is calculated with a surplus, like last year, and its parameters will for the first time ever come close to 1,500 billion rubles. The Russian budget has been drafted with a surplus for several years now; for instance, the 2006 budget projected the budget surplus at 1,104 billion rubles.
The next year's budget will not be an exception. Revenues will grow substantially. Compared to the 2006 budget, they will increase by more than 1 billion rubles. Expenditures will increase by nearly 800 billion rubles. In 2007, GDP will reach 31,220 billion rubles, i.e. 106% of the 2006 figure. The budget also provides for an increase in minimum wage to 1,400 rubles (this amount is necessary for the estimation of various state allowances and subsidies) and a 15% pay rise for people employed by budget dependent organizations.
It is clear that the Stabilization Fund, established to accumulate revenues from high world oil prices, makes deputies more confident in their work on the budget. In the 2007 budget, the Stabilization Fund will reach 4,200 billion rubles. Nevertheless, the Finance Ministry gave its first warning last summer that the deputies should not pin their hopes on the government's generosity. In 2007-2008, Russia may have a deficit budget. Without receipts to the Stabilization Fund, the federal budget deficit may reach 170.4 billion rubles in 2007, 163 billion rubles in 2008, and 132 billion rubles in 2009.
Thus, today, the deputies decided to support the government's version of the budget, with a substantial rise in revenues and with an even greater increase (in relative terms) in expenditures. The 2007 budget is the last pre-election budget. In a year, a new deputy corps will come to the parliament. In the meantime, the parliamentarians have to get ready for the elections.