Russian Finance Minister Anton Siluanov said that the country's budget deficit in 2018 will be the lowest in recent years.
"The budget deficit in 2018 will stand at 1.6% of the GDP. This is the lowest deficit in recent years. In the future, a gradual reduction of budget deficit is forecast to 0.9% of the GDP in 2019 and to 0.8% of the GDP in 2020," Siluanov said at the meeting.
Russia's finance ministry is planning to borrow $3 billion a year on global capital markets in 2018-2020, Anton Siluanov added.
The finance ministry raised $3 billion earlier this month as it enjoyed strong demand for its Eurobond from global investors.
The director of the center for research into regional reforms of the Institute of Applied Economic Research of RANEPA, Alexander Deryugin, speaking with a correspondent of Vestnik Kavkaza, noted that such budget cuts below 2% were planned in advance. "The reserve fund is coming to an end, we cannot get the needed amount of loans on the international market, so the Cabinet does what it can. Today, the head of the Ministry of Finance announced the marginal costs that we can afford," he said.
The reduction in spending is likely to occur at the expense of spending on infrastructure. "A new electoral cycle is starting, and it's unclear what will happen with the parameters of the decrees of 2012. We will save by reducing traditional expenses for infrastructure development," Alexander Deryugin stressed.
Speaking about the government's more active participation in the domestic loans market to cover the deficit, the economist explained that other sources have been exhausted. "The funded part of pensions of Russians has already been spent, and this resource is no longer available, and this money could be spent on long-term investments.The budget can borrow the needed amount in the domestic market, but we understand that the state compete with the private sector in this market, which means that the rate of decline in interest rates on the borrowing market will slow down to the state market in the best case, which is a negative for the economy," the director of the center for research into regional reforms of the Institute of Applied Economic Research of RANEPA warned.
He explained the need to create a new reserve fund by the need to protect ourselves from falling oil prices . "Nobody knows what oil prices will be, and if they are lower than the level set in the three-year budget, the new reserve fund will protect the budget from the sequestration. If oil prices are higher, the fund can be directed, for example, to cover the current deficit. But the new funds' money will also be an additional opportunity for the government to redistribute funds between various state programs. If there are any issues that require additional funding, the fund will be a flexible governmental tool to solve them," Alexander Derjugin summed up.