Putin Demands Growth to Underpin Social Spending

MOSCOW, June 13 (RIA Novosti) – The Russian government must use its budget revenues more carefully and avoid any increases in social spending not supported by economic growth, President Vladimir Putin said on Thursday.

Putin delivered an annual budget address on Thursday, outlining his guidelines for the government to prepare Russia’s budget for the period 2014-2016. The government’s plans will then be considered by the Duma, Russia’s parliament, in the fall.

“We have no more effective way of solving social issues than ensuring economic growth rates. That is why our policy priority has always been, and will always be, the improvement of the living standards of Russian citizens,” Putin told ministers at the government meeting.

“But there must be an understanding that the only correct way to achieve these goals is to solve the problems in the economy,” Putin said.

The government must “complete within three months a budget strategy through to 2030 and, if necessary, make changes to the long-term forecast for social and economic development,” he said, adding the strategy should assess possible risks and outline government responses to any scenario, including unfavorable developments.

The model of a constant increase in Russia’s budget spending based on high growth rates resulting from rising commodity prices has used up its potential, the president added.

The government therefore must optimize federal budget spending, find reserves and redistribute spending in favor of priority projects, Putin said.

“There must be an increase in the share of spending that gives the highest effect for economic growth and social development,” he said.

The Russian government can find the main part of its reserves by achieving a long-term balanced budget for the pension system and gradually reducing budget subsidies to the Pension Fund, on condition pensioners’ living standards are consistently improved, the president said.

Russia must also actively use private-private partnership mechanisms to attract private investment for state programs, and also use the National Wealth Fund’s resources and pension money for self-supporting infrastructure projects, he said.

Putin also urged the government to make the budget and budget process more transparent.

“Citizens and business must know where their taxes go. This requires a high level of budget process transparency.”


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