Russia is preparing for “mobilization of resources”: experts remembered the 90s

Economists spoke about the dangers of sequestration for state employees

The Ministry of Finance sees no risks for the fulfillment of budget obligations in 2023, Finance Minister Anton Siluanov said. At the same time, he stressed that the department and the government are preparing for “resource mobilization” for the next three years. But why? The economies of many countries live well in the conditions of deficit budgets. So maybe this is not a problem? Experts believe that in the short term there is nothing wrong with this phenomenon, but if debts accumulate for years, the state will have to cut social spending and raise taxes.

Speaking about the budget for the current year, Anton Siluanov said that “there are no problems in terms of all basic solutions”, and in terms of additional ones, “resources will be found”.

“About this year, in general, we will reach our planned targets, so we don’t have any special risks of fulfilling all our obligations … And for the next three years, we are now working out with the government, together with our colleagues in the government, resource mobilization tasks,” the Minister of Finance specified.

Meanwhile, the deficit for the first half of the year tentatively amounted to 2.595 trillion rubles, in June it decreased by 816 billion rubles.

For ordinary people, the budget deficit is more of a blessing than a problem, as the government spends more money on people, on the development of industries, on infrastructure, Alexei Zubets, director of the Center for Socio-Economic Research of the Financial University under the Government of the Russian Federation, told MK.

“It turns out that in the short term (2-3 years) there is nothing wrong with a budget deficit. But if we talk about the long term (10-15 years), if debts continue to accumulate, then in the future, in 20 years, this may lead to the bankruptcy of the state. It will be fatal for us,” he stressed.

The consequences of getting used to the budget deficit are imperceptible at the beginning, but over time they become chronic, said Oleg Buklemishev, director of the Center for Economic Policy Research at the Faculty of Economics of Moscow State University.

“Remember the 90s, when everyone said “a deficit of 5-10% is nothing to worry about, we will survive,” and it all ended in a devastating crisis and the need to seriously cut costs,” the expert continued. – I hope that the lesson learned then was well remembered by our authorities. Now the budget deficit does not look so deadly. I expect 5-6 trillion rubles a year. This can easily be financed both from reserves and from the balances that are available in the treasury. The situation will become a problem when the chronic deficit passes to the next year, to the second, third. Then it will be clear that it will not be possible to cover it only with borrowings. It will be necessary either to take away money from those who are already “sitting” on them – these are budget recipients – or to raise taxes.”

According to Mark Goykhman, an analyst at the Capital Skills Financial Academy, Candidate of Economic Sciences, a budget deficit leads to an increase in inflation within six months or a year.

“The state increases the amount of money in circulation to cover the deficit, increases borrowing, rates. All this leads to a depreciation of the national currency, the growth of inflationary phenomena. On the one hand, budget recipients receive these funds, but, on the other hand, prices are rising. This funding is largely depreciated due to inflation caused, among other things, by the budget deficit,” he stressed.