Аbout financial results for 2013 and goals for 2014.
Dmitry Medvedev’s opening remarks:
Expanded board meeting of the Ministry of Finance
Good afternoon, colleagues. As usual, we have met to discuss the performance of the Ministry of Finance last year. The Prime Minister has never said that the Ministry of Finance has failed to fulfil its tasks and that he was dissatisfied with its work. I’d like to say that the Ministry has worked as a highly professional team capable of carrying out various tasks in the most difficult conditions. These words about difficult conditions are not a figure of speech, although we always speak about difficult conditions. No, the conditions were truly difficult.
A few words about economic conditions, which continue to worsen, as you are aware. According to preliminary data, the economic growth rate slowed to about 1% in the first quarter. Experts have assessed the events and much has been said about the reasons behind the economic slowdown. The key factors include the end of the growth cycle of global energy prices, although they have stabilised at an acceptable level for Russia. However, we cannot rule out the risk of price fluctuations, which the Minister of Finance always mentions when we discuss budget execution, including due to current developments on the energy market. The situation on this market is changing, and no matter what we hear, the shale revolution and the development of gas liquefaction technology are directly influencing the finances of the world’s largest energy supplying countries.
Another group of reasons is that we have exhausted the facilities for the post-crisis revival of the national economy. This is a major issue under discussion. Investment activity has slowed, real economy enterprises are short of their own investment funds, while their expenditures are increasing and the gap is growing between their earning power ratio and loan interest rates. One of the biggest risks is growing uncertainty on the global financial markets. Capital is flowing out of developing countries, including as a result of decisions taken by the US Federal Reserve System. External financing, which large Russian companies and even banks used in the past, is plummeting, including – let’s be honest – for political reasons.
In general, we need to take into account the political aspects of the current situation. Our difficulties are due, to a degree – but only to a degree – to attempts on the part of certain forces to create an artificial crisis in Russia. But we must take this aspect into account when forming our current policy and our strategy for the future.
So, the current situation is difficult, very difficult perhaps, for the finance department and the Government as a whole, and we are not happy about the trends I have mentioned. We must be ready to act under the most unfavourable conditions and to plan measures to mitigate the effect of some unforeseen factors.
Most of our colleagues know that it wasn't all fat years in the past,that opportunities were not always good and development was not always rapid. There was a crisis in 2008, which, frankly speaking, no one expected, and other external shocks. But I want to say that one must keep moving even in such circumstances in accordance with one’s priorities. In other words, we must fulfil our obligations, our social obligations to the public, and work to ensure the development parameters set out in the President’s executive orders and the Policy Priorities of the Government.
Dmitry Medvedev: "First for financial policy, it must ensure budgetary stability. It is a fact that many spheres of life in the country depend on a responsible macroeconomic policy and on a balanced and stable budget."
Of course, a major part of these responsibilities rests with the Ministry of Finance, which is responsible for financial policy. Therefore, I will say a few words about the tasks set to it.
First, it must ensure budgetary stability. It is a fact that many spheres of life in the country depend on a responsible macroeconomic policy and on a balanced and stable budget. The important thing is that we have substantial reserves and a flexible institutional framework, including budgetary rule. For those who don’t remember, a budgetary policy is formed so as to prevent a decline in government expenditures and a worsening of the overall economic situation due to a possible economic slowdown. Last year we had sufficient funds for all planned expenditures, although our oil and gas revenues and borrowing on financial markets were considerably lower than planned.
Dmitry Medvedev: "Stabilising factor in our favour is a moderate debt. Moreover, this could be a competitive advantage, which we must be sure to preserve."
Another stabilising factor in our favour is a moderate debt. Moreover, this could be a competitive advantage, which we must be sure to preserve.
We should continue to pursue this balanced policy, which has been tried and tested over the past 15 years, if we want to honour our social commitments this year and in the longer term.
The second aspect concerns effective budgetary spending, which I have mentioned before. This is likely a favourite issue for the Finance Ministry, about which all our colleagues there, starting with the Minister, love to talk, with good reason. Every rouble allocated from the budget must be spent in the most effective way possible. On the last day of 2013, the Government approved a programme to improve the administration of public finances (federal and municipal) during the period to 2018. This programme, which the Finance Ministry is coordinating, must be fulfilled.
Dmitry Medvedev: "The Government approved a programme to improve the administration of public finances (federal and municipal) during the period to 2018. This programme, which the Finance Ministry is coordinating, must be fulfilled."
We must also continue working to introduce the system of budgetary allocations under approved programmes. The bulk of federal programmes – 39 out of 42 – have been approved. Now we must turn them into effective policy instruments to ensure the financing of priority goals. Considering substantial macroeconomic risks I have mentioned, we must understand that our departments, the federal executive authorities, will be held more strictly accountable for achieving their goals and for honouring their obligations.
Dmitry Medvedev: "We need a balanced and, let’s say, smart tax policy, which should go beyond simply the fiscal goal of maximising budgetary revenues, although this is highly important. It should also encourage economic and investment activities and make work in Russia more attractive."
Also, we must not forget about budgetary transparency. Last year, we made the budget open to public scrutiny for the first time ever, and we must continue this positive experience. Moreover, we should not only listen to public opinion, but also take it into account when preparing budgetary decisions, if this can be done under current conditions.
Thirdly, we need a balanced and, let’s say, smart tax policy, which should go beyond simply the fiscal goal of maximising budgetary revenues, although this is highly important.
It should also encourage economic and investment activities and make work in Russia more attractive. I’m referring to the appeal of what we have recently been calling national jurisdiction, including special conditions for working under the control of federal authorities in such regions and districts as the Far East, the Republic of Crimea and Sevastopol, and Kaliningrad. We must gradually create conditions for the gradual deoffshorisation of our economy.
Fourth, it is important to further consolidate the financial system. This is a common task for the Government, the Finance Ministry and the Central Bank.
Dmitry Medvedev: "The banking system should not only encourage end consumption, but should also provide more opportunities for new investment projects to industrial enterprises, and small and medium-sized businesses."
We must use the potential of the new legislation on financial markets and the national payments system (we are already doing this) and make it as independent as possible from decision-making centres outside Russian jurisdiction. Russia is a large, self-sufficient country and we can certainly have such a system just like many other countries. This requirement is not linked with some current political problems but should be determined by our strategic choice. After all, we are involved with food security in the belief that we should feed ourselves, and this is absolutely normal. So we should have a fairly independent payment system, of course within the global limits.
The banking system should not only encourage end consumption, but should also provide more opportunities for new investment projects to industrial enterprises, and small and medium-sized businesses.
It is also important to continue modernising the financial market infrastructure and to increase the appeal of our business venues, including opportunities for placing bonds and conducting IPOs at domestic markets.
As you know, to carry out major infrastructure projects we’ve decided to use money from the National Wealth Fund to a certain extent. I’ve signed a Government resolution on the rules of spending this money on two major projects: the Central Ring Motorway and our Siberian railways – the BAM and the Trans-Siberian. This resolution will make it possible to place its funds into securities that will be issued to finance these projects.
Finally, the fifth group of issues is linked with inter-budget relations. A difficult situation is taking shape there. Slowing economic growth rates, including regional development, have brought about a decrease in expected budget revenues, including corporate income tax. This is practically a universal trend in this country (and I travel a lot). There is hardly a region that has not been affected by this predicament. In the meantime, tasks facing the regions require more spending. In some cases this leads to the growth of debts, and we must discuss this problem for this reason. The Finance Ministry should prepare proposals to balance out the regional and municipal financial systems. Naturally, regions themselves should make reciprocal proposals: they are responsible for this to the same extent as federal agencies. Just to repeat, we’ll review this issue in detail.
Dmitry Medvedev: "We must pay special attention to our two new regions: the Republic of Crimea and the federal city of Sevastopol. I know that some of those present have arrived to take part in their first panel meeting of the Finance Ministry. The Treasury has already organised its work and the President has drafted and signed a number of laws to regulate the operation of Crimea’s financial system in the transitional period."
We must pay special attention to our two new regions: the Republic of Crimea and the federal city of Sevastopol. I know that some of those present have arrived to take part in their first panel meeting of the Finance Ministry. The Treasury has already organised its work and the President has drafted and signed a number of laws to regulate the operation of Crimea’s financial system in the transitional period.
Needless to say, we must integrate these regions into our legal space as soon as possible and make it the least stressful as possible for people, although such processes are bound to leave a trace. I’m confident that Crimea has a very good development potential and can become a self-sufficient region with a self-sufficient budget if problems are resolved properly (this wasn’t done in Crimea under its former status).
These are general views on what I think should be done. Before giving the floor to the Minister, I’d like to thank all of you for doing a good job last year, and to wish you all the best.
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