Izvestia Interviews Finance Minister Anton Siluanov

For the last end of year interview installment we have the one that was actually first having been done on 14 December when Finance Minister Anton Siluanov was interviewed by Izvestia. That this is appearing after Nabiullina’s interview is appropriate since the two actually operate both as a team and part of a larger team—Russia’s main decision and planning core. Dedicated readers will have read his words before as he participates in many events jointly with Putin and is the one generally giving the economic reports, while Putin is famous for saying that Siluanov is always broke despite handling trillions of rubles. So, let’s read what he has to say about 2023 and the outlook for 2024 and beyond with Izvestia’s preamble at first:

The government calls the financial plan for the next three years the victory budget: the main priority is the implementation of the goals of the special operation, as well as the fulfillment of social obligations. At the same time, it is planned to allocate 10-11% of budget expenditures to the development of the economy. This was stated by Finance Minister Anton Siluanov in an interview with Izvestia. He stressed that for economic stability, we need to control inflation and budget expenditures, adding that the tax debt of companies to the treasury has decreased to 2.1 trillion rubles. According to Anton Siluanov, it is planned to allocate 4 trillion rubles from the National Welfare Fund for infrastructure projects. Do we need a single BRICS currency, why adjust preferential regimes, and which ruble exchange rate the Ministry of Finance considers optimal - in an interview with the Minister of "Izvestia".

"The number of problems has not decreased this year, but we understand how to act"

— You called the budget for 2023 one of the most difficult in your career. What can you say about the financial plan for the next three years?

The number of problems has not decreased this year. But we already understand the situation and know how to act. A year ago, when the budget was being prepared, a huge number of sanctions were imposed on Russia: there were restrictions on the operation of the banking system, in fact, our gold and foreign exchange reserves were stolen, and there were problems with settlements. Probably, in the entire history of Russia, we have never had to deal with so many questions that we needed to respond to quickly.

What would Western countries do in our place? They would start printing money. We can't do this, because we are pursuing a responsible budget policy, and we understand that any unverified actions may be followed by inflation, a decline in real incomes of the population, and a shutdown of certain sectors of the economy [as has happened in the West].

Last year was a period of serious decisions and priorities. And we can say that we have chosen the right path. We supported the people and the main sectors of the economy that provided employment for citizens and technological independence of the country. [Instead of the banks that caused the West’s problem.] It worked: in 2023, GDP growth will be 3.5%, next year-also positive trends.

When we adopted the budget for the next three years, we already knew what priorities were set. The main thing is to ensure macroeconomic stability, control over inflation and treasury expenditures, and concentrate resources on key tasks. We need to make sure that the population feels less about the restrictions imposed, and businesses understand that the state will help in a difficult situation. The adopted budget meets all these requirements.

— Nevertheless, the budget will be in deficit for the next three years, according to the plan. According to your estimates, when will the treasury run a surplus?

The deficit is set for the next three years at less than 1% of GDP. It is controlled and uncritical. A budget surplus is not an end in itself. The main thing is to ensure the fulfillment of all obligations to people and the operation of the economy. The budget is adjusted with a zero balance at the primary level.

Of course, the level of the deficit will depend on incoming revenue. The external environment and the situation with the domestic economy are affected. It is clear where to get sources of deficit coverage. The most important thing is that the budget structure is stable, and all key decisions, primarily social ones, are implemented.

"Despite the restrictions, supporting the economy is the most important part of the budget."

— The budget includes a reduction in the share of expenditures on the national economy. Does this mean that the share of state investment in it will decrease?

Expenditures on the economy account for about 10-11% of the total budget expenditures, and they are quite stable. Indeed, in the current conditions, the main task is to financially support the goals of a special military operation. The Parliament and I have described the financial plan for the three-year period as the Victory budget. Therefore, the ratio of expenditures on the economy in the total amount of treasury spending has slightly decreased, but in nominal terms they have not decreased.

Spending on roads and construction projects is growing, and a new program for modernizing municipal infrastructure is being envisaged. Funds from the National Welfare Fund are still being used. About 4 trillion rubles of the National Welfare Fund is provided for investment in infrastructure and technological projects, and we will continue to issue infrastructure budget loans to the regions to support the economy [These loans are at much lower rates than market].

Subsidizing of mortgage interest rates is significantly increasing due to the growth of the key rate. There are many tools that are not directly investment expenses but affect investment activity. Examples: subsidizing rates in the main areas of technological development, SMEs, agriculture, participation in public-private partnerships, and concession projects.

The well-being of citizens depends on the growth of the economy. Despite all the restrictions, supporting the economy is an essential part of the budget.

"If we provide tax benefits, then they should work"

— In the “Main directions of budget, tax, customs and tariff policy for 2024-2026”, the Ministry of Finance listed preferential regimes that need to be adjusted. When do you plan to make changes and what is their main purpose?

The logic of the Ministry of Finance is very simple: if we provide tax benefits, then they should work. In other words, an investor who receives support will have to expand their production and create new jobs. The situation when companies receive preference but are not engaged in the development of their activities should not be repeated.

In other words, if you have received benefits for 100 rubles, invest at least 100 rubles in development. I think this is a fair approach to the operation of preferential regimes [Yes, that’s how it ought to work but seldom does in the West].

— The budget for next year does not take into account income from the excess profit tax — it is assumed that they will be paid in full in 2023. How much money has the business already paid for the so-called windfall tax? And what is the probability that this tax will be re-introduced in the coming years?

We have already said that this is a one-time measure. The taxpayer had a choice: to pay by the end of November at the rate of 5%, or next year-twice as much. This measure worked — the total amount of revenue that we planned to receive was collected. The treasury received more than 300 billion rubles, and to be precise — 305 billion. I am sure that by the end of the year the budget will still be replenished from the collection. We will continue to coordinate our tax actions with businesses.

"We don't plan to change the budget rule"

— You assumed that the budget rule could be adjusted if necessary. What are the conditions for this and how can it change?

— The budget rule was introduced in order to determine the maximum level of expenditures, to form stocks of NWF [National Welfare Funds] in favorable conditions, and vice versa. For the next three-year period, a new rule design was adopted. We do not plan to change it in the near future.

The new design provides for sending oil revenues to the National Welfare Fund at a price above $60 per barrel. In 2024, the transition period will continue to operate, and from 2025, we will fully comply with the new rule. There is no reason to adjust this mechanism yet — it has proven itself well in the past. Now we are using these resources for the benefit of the economy and ensuring the country's technological sovereignty.

"Immigration and restrictions could not but affect the ability to pay taxes"

— According to the conclusion of the State Duma Committee on Economic Policy on the draft budget, the tax debts of companies to the treasury last year increased to 2.5 trillion rubles. What are the risks to the budget in this regard? Has the situation changed in 2023?

Companies faced sanctions and restrictions — this could not but affect the ability to pay taxes. But according to the latest data, in the first three quarters of this year, the amount of debt decreased and reached the level before the start of the free economic zone — 2.1 trillion rubles.

Last year, we gave businesses a deferred payment of insurance premiums, and the enterprises have working capital. In 2023, the money is already being returned to the budget system. We expect the same in the next one.

The growth of debts in conditions when an unprecedented number of sanctions were imposed on Russia is an objective reaction. Now the situation is normalizing — there is no reason for concern in this part.

"The BRICS single currency is a matter for the future"

— Last year, there was a lot of talk about the common currency of the BRICS countries. What prospects do you see in this direction?

We do not use the dollar and euro, as they are unreliable for calculations. They are held in national currencies and the currencies of friendly countries.

As for the BRICS currency, it is rather not about creating a single currency, but about simplifying payments between our countries. The possibility of multi-party clearing is also a matter for consideration.

The BRICS single currency is a matter for the future. Next year, when Russia holds the presidency of the Union, the topic of settlements and the use of digital financial assets will be one of the key topics on our agenda.

— Can we say that the transition to payment in national currencies indicates not just a change in the architecture of the entire financial world system, but also a whole philosophy?

The world is changing. If earlier the world economy was dominated by the G7 countries with their own currencies, today a number of countries are ready to pay in national currencies without any problems. They have proven their reliability and sustainability.

"We do not use the currency exchange rate to replenish the budget"

—Returning to national currencies, can we say that the period of ruble volatility is over? And what is the best course for your budget today?

We do not use the currency exchange rate to replenish the budget. We are guided by the forecasts that were laid down during the preparation of the three-year financial plan — this is 90 rubles per dollar.

The main thing is that the ruble exchange rate is predictable. We do not seek to weaken or strengthen it. The exchange rate is floating, but it should be predictable both for the population and for participants in foreign economic activity.

Our goal is to ensure that exchange rate volatility is reduced. For this purpose, control over the return of foreign currency earnings was introduced, and monitoring of its sale in our foreign exchange market was established.

Even the work of the sub-commission on foreign investment is guided in its activities by the fact that the foreign exchange market is stable.

— What external risks can be considered key for the Russian economy today?

External risks mainly come from unfriendly countries. In particular, they export inflation to other countries because of their large deficits and debts. Sanctions and restrictive measures are still in force, which negatively affect everyone — not only Russia, but also other states.

We take these risks into account and try to offset them in our budget. The most important thing is that people get paid, businesses work, and the state's finances are stable.

"New technologies make services accessible to people"

— We are discussing the budget at the stand of the exhibition "Russia", which is called "Financial technologies in the service of people". How do these technologies help replenish the treasury and distribute resources fairly?

First of all, it is necessary for people to simplify the interaction of citizens and businesses with the state. For example, this year we launched an innovation-a single tax payment. If earlier the company filled out payment documents for each tax, providing mountains of reports to the Federal Tax Service, incurring large administrative costs, now you only need to make one payment. And the tax service, together with the Treasury, distributes funds to all levels of the budget system. You can easily see the movement of funds through your merchant profile.

Such services help people determine what taxes they should pay, what payments and benefits they are entitled to. As for the state treasury, the Electronic Budget system has proven itself well. New technologies make services accessible to people and organizations, saving them time and effort.

— So, with all the scale of the exhibition, it is worth visiting your stand to get acquainted with all these technologies?

"That's right. I invite everyone to the pavilion of the Ministry of Finance at the exhibition "Russia" [pictured below]. [My Emphasis]

As became obvious at the conclusion, the interview occurred at The VDNKh Center in Moscow, the permanent “Exhibition of Achievements of National Economy.” As you read, the main emphasis is placed on ensuring the wellbeing of Russians, which seems natural, or ought to despite that not being the case in Neoliberal dominated states like the Outlaw US Empire. Recall what happened to millions of Russians during the Neoliberal rape of the Yeltsin decade where many lost all they had and more died than during the Great Patriotic War due to the vastly immoral mismanagement of the Russian economy—the biggest fear for those who survived is having it recur, and the only way for the Russian government to quell those fears is to keep its economy moving upward. Yes, Russia is somewhat conservative in its financial philosophy as it tries to balance its budget and save revenues for developmental projects that can be financed outside the main budget which is what the NWF is for. Unmentioned but vital for controlling the budget is the performance of Russian public utilities which keep overall costs of running and servicing the economy much lower than those of most developed states, such as defense expenditures as I remarked in a recent article.

Russia’s main government officers are either on vacation and/or having some private meetings as is the Russian New Year Tradition for January and usually lasts until 7 January which is Orthodox Christmas. So, I anticipate a return to the usual pace beginning next Monday or Tuesday, although the SMO hasn’t stopped or slowed down too much from the weather.

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