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. Last Updated: 07/27/2016

EDITORIAL: New Budget Won't Avert Cuts, Arrears




In theory, it should be great news that after five months of wrangling the State Duma has finally passed a budget for 1998. The only trouble is that it isn't really a budget.


A budget should take a realistic view of revenues and then plan spending accordingly. But the budget the deputies have just passed takes an unrealistic view of revenues and then authorizes the government to make cuts if necessary.


This may suit the government fine since it will have carte blanche to spend as much as it thinks it can afford and it will probably suit the deputies who have effectively washed their hands of responsibility for the economic situation. The markets will probably like the budget's low deficit. But the document will only aggravate the chronic non-payments crisis in the country.


The likelihood is that spending will have to be cut by about 10 percent from budget predictions. Although the Duma has obligated the government to announce cuts as soon as they become necessary, that uncertainty will make rational planning impossible.


Scores of social programs and government departments that have been promised funding will suddenly find their budgets have been slashed and that they lack the money to pay their energy bills, their workers and their commercial creditors.


This problem will only be compounded by the amendment adopted Wednesday requiring the government to make proportional cuts across the board on all budget items. Rather than deciding which programs should go ahead and which should be scrapped, the government will have to cut back a little in all sectors. This may make sense in some areas, but what does the government do if it only has the funds to build half a bridge?


It is true that Russia faced an especially difficult task framing the budget this year because of the uncertainty caused by the crisis in Asian markets. But it would be a great pity if, after months of promising that it will only accept a realistic budget, it now accepts this half-baked spending plan.


Some may argue that it is better to have some budget than none at all. Perhaps. But the government could just continue doing what it has already do ne in the first two months of this year. With no budget in force, the government is allowed to go on spending at a monthly rate equal to one-twelfth of last year's level.


Such a policy would not lead to any more financial uncertainty and it would allow the government to avoid the accusations of broken promises and payment arrears to which the current rubbery document will expose it.