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Russia sharply increased spending on defense

Россия резко увеличила расходы на оборону

The Russian government continues to increase public spending on defense and security forces, despite a sharp deterioration in the Federal budget, which in may was faced with a 3-fold decrease of oil and gas revenues.

For the first five months 2020 military expenditures reached 1,409 trillion rubles, it follows from the operational data of the Ministry of Finance.

Year-to-year financing of the army and the state defense order increased by 146 billion rubles, or 11.5%, and reached a new historical record.

The budget allocations for the armed forces have grown by 137 billion rubles, or 14.2%, to 1,062 trillion rubles; on the nuclear weapons complex – almost in 1,5 times, to 21.1 billion rubles, for applied research in the field of arms 23%, to of 151.6 billion.

At the same time continues to increase flows of money towards intelligence and law enforcement agencies. Under the “national security” for January-may, the government spent 773,7 billion rubles, up 8.7%, or 62 billion rubles, more than a year earlier.

8.6 billion increased funding of the Ministry of interior (248,5 billion) 9 billion more went to Regardie (91,1 billion rubles), to 12 billion rubles increased allocations to the budgets of the FSB and FSO (“security bodies”, 135 billion rubles).

The cost of the state apparatus have soared almost 20% to 564 billion rubles. Almost half went up the contents of the presidential administration (10.6 billion rubles), 10% – the judiciary (69,9 billion), with the same budget increased the foreign Ministry (156 billion).

The officials and security forces left 33% of the spent government money – 2,746 trillion rubles out of 8.3 trillion.

Total budget expenditures grew by 23% year-on-year in may, growth reached 43%, while one-third of all additional funds went to “national defense.” “Most likely, we are talking about the growth of social payments and salaries of the military – they make up the bulk of the open part of expenses under this article,” – says economist of Raiffeisenbank Stanislav Murashov.

Another third of the additional spending went to subsidies to regions whose budgets was “the biggest blow” of the crisis, he adds: “the Main victim is the small and medium business, which is largely the user of the regimes and does not pay VAT and most other Federal taxes.”

Social budget expenditures grew 19 percent, to 2,503 trillion rubles, financing health care because of the pandemic had to be increased by almost half – from 262 to 574 billion.

By the end of may the budget was 615 billion deficit, which “ate” all accumulated in the beginning of the year surplus. The result is cumulatively over five months the expenditure exceeded the income for 409 billion rubles.

The hole in the budget could be three times greater if not for a one-off receipts from the transaction with Sberbank, listed by the Central Bank to the government in April.

Without these inflows, the budget deficit at 1.5 trillion rubles, while a year ago had a “surplus” revenues by almost the same amount (1.3 trillion), indicates the chief economist at ING in Russia and CIS Dmitry Dolgin.

While the government adheres to the “crisis mode”, increasing expenditures in anticipation of voting on amendments to the Constitution, as well as by allocating additional money to the entities that provide two-thirds funding social sectors, including health care, benefits and housing.

To December “hole” in the Treasury will reach 5 trillion rubles, or 4-5% of GDP, estimates Dolgin: of this amount, 3.5 trillion, the Finance Ministry plans to borrow in the market, and another 1.5 trillion – to withdraw from the Fund.

 

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