Siluanov presented a program of frontal cuts in government spending – Kommersant

The Ministry of Finance has developed a program of frontal reduction of budget expenditures, sources said Vedomosti. It was presented by Minister Anton Siluanov at a meeting of the government commission on budget projections on June 29. The head of the Ministry of Finance suggested that all departments cut spending by 10% on unprotected items (that is, not related to the fulfillment of state obligations, including social ones). Decisions have not been made, the Ministry of Finance will finalize the proposals.

The Ministry of Finance explains the need for frontal spending cuts by the growing gap between spending and income. As an alternative, it was proposed to increase borrowing, but the representative of the Central Bank spoke out strongly against it. He attributed this to a bias in public sector lending, which limits business access to loans.

The participants in the meeting of the government commission “reacted mostly negatively” to Mr. Siluanov’s proposals, Vedomosti writes. According to the publication, they were opposed to spending cuts “along the entire perimeter of programs” and, agreeing with the need for optimization, they proposed allowing departments to determine for themselves what spending is a priority for them.

The Ministry of Finance, according to Vedomosti, did not take into account a number of factors in its program: the acceleration of GDP, the strong dynamics of income, the changed realities in the ruble exchange rate. At the same time, Mr. Siluanov used more recent estimates compared to the latest officially approved socio-economic development forecast.

Vedomosti does not disclose the principle of frontal cost reduction, which was proposed by the Ministry of Finance. The topic was publicly discussed during the St. Petersburg International Economic Forum. Then Mr. Siluanov noted that many expenses “have not been reviewed for a hundred years.” The Ministry of Economy saw two ways: hard, with the rejection of inefficient programs, or softer, due to a proportional reduction in all costs, but the government can also choose a “hybrid” regime. In the Central Bank, the frontal spending cuts are considered the worst from the point of view of the economy. First Deputy Prime Minister Andrey Belousov noted that 10-15% of expenses can be reduced through targeted optimization.

More about the discussion – in the material “Kommersant” “Adaptation must be economical”.

Leonid Uvarchev