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The Ministry of Strategy and Finance plans to strengthen the government's commitment to "living within the framework" included in the 2025 budget by tightening the rules for spending public funds. To this end, the Ministry of Defense proposes changing the budget execution procedure to more actively redistribute the unused budget for each ministry. Consumers must confirm the seriousness of their intentions regarding purchases, subsidies, and investments in the first half of the year. Otherwise, reserve funds will replenish the government's reserve fund by September 1 and will be redirected to other priorities. The White House has had no shortcomings over the past three years. In the short term, accelerating the penetration of public funds into the economy may weaken the disinflationary effect of tight budgets, which the Bank of Russia hopes for, but in the long term it will contribute to an increase in supply, which is disinflationary in nature.
The Ministry of Finance has published a draft government resolution on regulator.gov.ru, coordinating the approach to the execution of the federal budget starting from 2025. The Ministry of Education proposes a more stringent plan for the redistribution of budget funds between beneficiaries. Now the department must confirm its plans for purchases, grants and capital investments with specific actions in the first half of the year. Funds reserved in the budget without such verification are proposed to be transferred to reserve funds and redirected to other priority purposes.
As for government procurement, the plan is as follows: By publishing a procurement notice in the unified information system for the procurement sphere, the Ministry of Finance practically eliminates the current opportunity for customers to delay signing a contract until June 1.
The agency now requires such agreements to be concluded by August 1, and the ability to post or agree to notifications will be blocked from June 2. This prevents customers from artificially "inflating" their notifications with additional purchases after the fact.
Funds accumulated in the budget but not used by customers will be transferred to the reserve fund by September 1, and starting in August, the budget management department will be able to make proposals for new ways of using unclaimed funds.
Plans for capital investments are also being adjusted. Customers will now have more time to approve project documentation for facilities (the deadline has been moved from March 1 to April 1), but they will have until June 1 to sign a contract with the contractor. Instead of July 1. As for grants, the agreed deadlines for their provision have been preserved, but now the Treasury requires confirmation that the process is actually moving forward. Departments distributing subsidies must send information to the Ministry of Finance on contracts concluded with state beneficiaries. A mechanism for withdrawing funds for the purpose of reserving and redistributing funds is also provided.
The expected changes will allow the Treasury to more aggressively reallocate funds between priority projects while cutting inefficient and unnecessary spending.
The government has been experimenting with the possibility of managing these budget expenditures since 2020, and in the context of a deficit budget and the uncertainty of "covid", it had to increase spending on unforeseen circumstances. As a result, the Ministry of Finance proposed the possibility of redistributing budget allocations to accelerate the construction of "advanced" capital construction projects by extending the deadlines of "deferred" projects. The government also closed the department's ability to independently redistribute funds from national projects that were reserved but not used for other purposes at the end of the year. The funds were redirected to the White House Reserve Fund, which expanded the possibilities for manual control. Funds that were used ineffectively or reserved by beneficiaries "for future use" (see Kommersant of February 25 and March 17, 2021)
The Treasury's new plan is in line with the government's ambition to live within its means from 2025.
Next year's budget will be very tough. Although imports increased by 12%, expenses this year grew by only 5% and fell completely compared to the size of GDP (see Kommersant of October 1). , 2024). From September 1, as money accumulates in the reserve fund, the government will provide financing for unforeseen expenses. In recent years, this has become part of the regular budget. The market and the external environment are growing.
If the proposed plan is implemented, the department will not have to inflate its budget and increase the deficit. It is about prioritizing existing costs. At the same time, stimulating recipients of funds in the first half of the year will speed up the penetration of state funds into the economy. In the short term, this may undermine the inflation relief that the Bank of Russia is hoping for in the context of a limited budget. But in the long term, this will contribute to an increase in supply, which is also disinflationary in nature.