It was the “most difficult” job of his career, according to Russian Finance Minister Anton Siluanov. The new Russian state budget for 2023-2025 underwent no fewer than 750 adjustments and improvements last month before being approved by the State Duma this week.
Duma chairman Vyacheslav Volodin agreed that this was a financial monstrous job: “This was the most difficult budget of recent years, due to the sanctions and the almost unpredictable developments in the world economy. In such circumstances, a budget must be flexible and reliable at the same time.” quoted the Russian business newspaper Vedomosti Volodin Thursday at the presentation.
It was the most difficult job in years, but also the most mysterious. This year, the Russian government decided to make no less than a quarter of the Russian state budget a state secret.
Experts see two reasons for this: the avoidance of new sanctions, and the concealment of expenditure in Ukraine – in addition to the “special military operation”, this concerns expenditure in the Ukrainian territories annexed by Russia and already partly liberated. The secrecy makes it virtually impossible for outsiders to gain a good insight into the state of Russian finances and the Russian economy as a whole. From what is being announced, an ominous picture emerges.
Deficit 100 billion euros
The documents presented on Thursday give a less than favorable impression of Russia’s financial health. Income for 2023 is estimated at more than 400 billion euros (26 trillion rubles), while expenditures are well above that at just under 500 billion euros (29 trillion rubles).
This difference is only expected to widen in the coming years. Russian media, including those operating from Latvia Medusa, estimate that “Ukraine”-related spending this year will total some 6.5 trillion rubles (over $100 billion). According to Reuters, part of this goes to paying salaries to (mobilized) soldiers and, in the event of their death, compensation for their surviving relatives.
The government’s plans do not bode well for the Russian population. Reuters news agency calculated that next year Russia will spend almost a third of the state budget on defense and security, while at the same time making significant cuts to education, hospitals and road construction.
The budget for ‘homeland security’ will double next year. This includes expenses for the Investigation Committee (the Russian Public Prosecutor’s Office, which is almost entirely under presidential command), the public prosecutor’s office and the prison system.
Rosgvardia, the elite corps founded by Putin in 2016, is also expected to receive a lot of money. The organization acts as a military police within Russia to keep the population, criminals and “domestic terrorists” under control, but is also said to have been active in Ukraine since the start of the war.
Scarcity of parts
The strict Western sanctions, imposed as punishment for the Russian invasion of Ukraine, also seem to have a major impact on the Russian economy. Although its effect – apart from sharp price increases – is not yet clearly visible everywhere.
The consequences of the export bans and the exodus of Western companies are being felt everywhere. For some sectors that are highly dependent on the West, such as the aircraft industry, the consequences of the parts shortage will be felt according to experts may prove catastrophic in the long run.
According to Russian economist Dmitry Prokofiev, the government hopes to keep the economy going by somehow “forcing” the population to spend more money. “Economic recovery is not possible as long as Russians have not adapted their household budget to the new situation. They will just have to get used to the fact that they now spend more on Russian-produced goods than what they previously paid for imported goods. indicated the economist the current government policy towards news site 63.ru from the Urals.
Prokofiev also fears that Russians will have to work harder for less money, just like the Russian farmers did in the 1920s. “Russians understand that very well, they take their money from the bank and keep their hand on the purse strings.”
But that which is not there cannot be spent either. A survey by the Russian job site Superjob of 1,600 working Russians across the country shows that only one in two residents (47 percent) have savings, wrote business newspaper Vedomosti at the beginning of this month. According to a report of the UN children’s organization, UNICEF, from October, the number of Russians falling below the poverty line this year will grow by 8.3 million. Among them are 2.9 million children.
It seems inevitable that the expected cuts will turn out to be disastrous for the already less than prosperous social services in Russia. In the 2023 budget, according to Reuters, almost a quarter less will be spent on infrastructure, agriculture and research and development. The fact that expenditure on health care and education is also being cut back is bittersweet for many Russians: it is precisely in those sectors of society that the situation is often distressing.
While Moscow hospitals can measure up to international standards, medical institutions in the Russian provinces are often in a deplorable state. Medical staff are poorly paid, care and general hygiene are substandard and many Russians seek medical help abroad.
Education experts are concerned about a collapse of Russia’s increasingly constricted and internationally isolated education systems and the decline of academic standards. While universities are facing increasing political repression and censorship and at least hundreds of teachers have fled the country, this year children were required to attend ‘patriotic’ classes. In it they learn weekly about the “cultural and historical unity” of the Russian nation, and love for the fatherland is taught to them.
A version of this article also appeared in the newspaper of November 26, 2022