BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/05
Spending cuts are currently under preparation led by the finance ministry, but a large part of budget spending is ruled out from cuts. On the other hand, the economy ministry is drafting an economic support programme for this year. The programme seems to be largely cosmetic, however, as few additional funds are expected to be allocated to finance it.
The notion of raising money for the budget through privatisation of state-owned enterprises is back on the agenda. Privatisation plans have been under preparation for years, but the actual privatisation sales of large firms have been postponed due to market weakness. The situation is unlikely to improve this year. The terms that president Putin has imposed on privatisation sales further limit the pool of potential buyers. Even in the best case, the impact of privatisation sales on the budget would be limited and temporary.
The reluctance to tackle difficult reforms can also be seen in the government’s long-term plans. Russia’s structural economic problems have been long recognised and e.g. the list of economic goals of the recent national security strategy again includes improving the investment climate and business environment, as well as increasing productivity. In practice, these goals have remained secondary, with the emphasis instead on import substitution and other measures restricting business operations.