To Finance Putin’s Military Build-Up, Moscow Cuts Spending on Economy and Pensioners

Paul Goble

            Staunton, November 25 – In the budget approved this week, the Russian government will spend 38 percent of its money on supporting the military and the police, increases to be paid for by significant cuts in spending on the economy as a whole and on pensioners in particular rather than by deficit spending. Indeed, the budget projects a decline in the size of the deficit next year.

            The actual shift to the military and police is even larger than this, of course, because these figures reflect only the open part of the budget. But even the open amount has gone up significantly, by 260 billion rubles (4.5 billion US dollars) to 5.09 trillion rubles (85 billion (60 billion US dollars (finanz.ru/novosti/aktsii/gosduma-odobrila-sokrashchenie-raskhodov-na-ekonomiku-i-pensii-1009380200).

                To pay for this, social spending has been cut by 7.8 percent over all and pension spending by 12.9 percent, despite the economic crisis; and economic spending has been cut by 16.4 percent, a trend that will also worsen the country’s economic prospects despite spending on the military.

            Officials hyped the fact that there was a slight cut – 4.6 percent -- in the amount allocated for government officials and small increases in spending on education – up 4.9 percent – and in spending on health care – up 1.4 percent.  Federal spending in support of the regions is also slated to go up by 9.1 percent.

                But these figures may all be meaningless not only because of the closed portions of the budget and because the Russian budget is often revised but also because this budget, as Duma speaker Vyacheslav Volodin said, is based on the assumption of GDP growth of two percent, a figure many independent experts do not expect the Russian economy to meet.

            Indeed, the budget makes achieving that level even more difficult than one might expect because by cutting social spending and pensions, it will depress the purchasing power of the population, thus putting further downward pressure on the economy as a whole. No increase in military spending is likely to compensate for that.