IMF Country Report No. 14/ 134

RUSSIAN FEDERATIONFISCAL TRANSPARENCY EVALUATION
May 2014

This pilot Fiscal Transparency Evaluation for the Russian Federation was prepared by a staff
team of the International Monetary Fund based on the July 2013 version of the revised Fiscal
Transparency Code and the information available at the completion of their visit to Moscow
on October 30, 2013.
The publication policy for staff reports and other documents allows for the deletion ofmarket-sensitive information.

Copies of this report are available to the public fromInternational Monetary Fund  Publication Services
PO Box 92780  Washington, D.C. 20090
Telephone: (202) 623-7430  Fax: (202) 623-7201
E-mail: publications@imf.org Web: http://www.imf.org

International Monetary Fund
Washington, D.C.

©2014 International Monetary Fund

Fiscal Affairs Department andStatistics Department

RUSSIAN FEDERATIONFISCAL TRANSPARENCY EVALUATION

Richard Hughes, Tom Josephs, Viera Karolova,
Vladimir Krivenkov, and Gösta Ljungman
May 2014

RUSSIAN FEDERATIONCONTENTS
Glossary and Legend ____________________________________________________________________________ 5
Preface ___________________________________________________________________________________________ 6
EXECUTIVE SUMMARY __________________________________________________________________________ 7
I. FISCAL REPORTING___________________________________________________________________________12
1.0. Introduction _________________________________________________________________________________ 12
1.1. Coverage of Fiscal Reports __________________________________________________________________ 14
1.2. Frequency and Timeliness of Fiscal Reporting _______________________________________________ 24
1.3. Quality of Fiscal Reports _____________________________________________________________________ 24
1.4. Integrity of Fiscal Reports ___________________________________________________________________ 27
1.5. Conclusions _________________________________________________________________________________ 28
II. FISCAL FORECASTING AND BUDGETING ___________________________________________________30
2.0. Introduction _________________________________________________________________________________ 30
2.1 Comprehensiveness of Budget Documentation ______________________________________________ 32
2.2 Timeliness of Budget Submission and Approval _____________________________________________ 36
2.3 Legal Framework for Budgeting ______________________________________________________________ 39
2.4 Policy Orientation ____________________________________________________________________________ 39
2.5 Credibility of Forecasts and Budgets _________________________________________________________ 41
2.6. Conclusions _________________________________________________________________________________ 43
III. FISCAL RISK ANALYSIS AND MANAGEMENT _____________________________________________46
3.0. Introduction _________________________________________________________________________________ 46
3.1 Risk Disclosure and Analysis _________________________________________________________________ 48
3.2 Risk Management ____________________________________________________________________________ 52
3.3 Fiscal Coordination___________________________________________________________________________ 59
3.4 Conclusions __________________________________________________________________________________ 65
IV. RECOMMENDATIONS ______________________________________________________________________67
1. Clarify Institutional Boundaries and Expand Institutional Coverage ___________________________ 67
2. Expand Balance Sheet Coverage ______________________________________________________________ 68
3. Enhance Consistency between Budgets, Statistics, and Accounts _____________________________ 68
2

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

4. Improve Disclosure and Management of Tax Expenditures ___________________________________ 69
5. Improve the Coverage and Detail of the Annual Budget ______________________________________ 70
6. Increase the Transparency and Scrutiny of Official Forecasts _________________________________ 70
7. Improve Disclosure and Analysis of Fiscal Risks _______________________________________________ 71
8. Publish Long-term Fiscal Projections _________________________________________________________ 71
9. Enhance the Financial Oversight of Public Enterprises ________________________________________ 72
FIGURES
1.1. Coverage of Public Sector in Fiscal Reports, 2012 ___________________________________________ 16
1.2. Public Sector Gross Liabilities ________________________________________________________________ 17
1.3. Public Sector Balance Sheet Coverage in Fiscal Reports, 2012 _______________________________ 19
1.4. Public Sector Net Worth in Selected Countries ______________________________________________ 21
1.5. Tax Expenditures ____________________________________________________________________________ 23
1.6. Stock Flow Adjustments _____________________________________________________________________ 25
2.1. Retained Revenue ___________________________________________________________________________ 33
2.2. Hidden (Unspecified) Expenditure in the Federal Budget ____________________________________ 34
2.3 Average Medium-Term Real GDP Forecasting Error 2000-12 ________________________________ 35
2.4 Average Difference Medium-Term Estimates and Actual Expenditure ________________________ 36
2.5. Average Size of Supplementary Budgets 2000-12 ___________________________________________ 42
2.6. Expenditure Increases Following Budget Approval 2000-12 _________________________________ 43
3.1. Indicators of Macro-Fiscal Risk in the G-20, 2002-12 ________________________________________ 48
3.2. Assets and Liabilities of General Government _______________________________________________ 53
3.3. Oil and Gas Revenue under Alternative Long-term Scenarios _______________________________ 55
3.4. State Guarantees ____________________________________________________________________________ 56
3.5. Total Liabilities of Russian State-Controlled Banks, __________________________________________ 57
3.6. Regulatory Capital Ratios in G-20 Countries, 2012/13 _______________________________________ 57
3.7. Average Annual Cost of Natural Disasters in G-20 Countries ________________________________ 59
3.8. Sub-National Liabilities in Selected Countries _______________________________________________ 60
3.9. Debt of Russian Regional and Municipal Governments ______________________________________ 60
3.10. Liabilities of 18 Largest Public Nonfinancial Joint-Stock Companies, 2012 _________________ 62
3.11. Equity Purchases and Subsidies ____________________________________________________________ 63
3.12. NPV of Change in Age-related Spending in G-20 Countries________________________________ 65
TABLES
0.1. Summary Assessment Against Fiscal Transparency Code ____________________________________ 10
0.2. Estimated Public Sector Finances Overview, 2012 ___________________________________________ 11
1.1. List of Fiscal Reports _________________________________________________________________________ 13
1.2. Russia: Estimated Public Sector Institutions and Finances ___________________________________ 15
1.3. Reported General Government Balance Sheet, 2012_________________________________________ 18
1.4. Estimated Public Sector Balance Sheet, 2012 ________________________________________________ 20
1.5. Difference between Accrued and Cash Revenue and Expenditure ___________________________ 22
1.6. Sources of Stock-Flow Adjustments _________________________________________________________ 26
INTERNATIONAL MONETARY FUND

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RUSSIAN FEDERATION

1.7. Summary Assessment of Fiscal Reporting ___________________________________________________ 29
2.1. Macroeconomic and Fiscal Forecasting and Budget Documents ____________________________ 31
2.2. Share of the National Budget Classified as Secret ___________________________________________ 34
2.3. Timing and Contents of Pre-Budget Statements in Selected Countries ______________________ 37
2.4. Timing of Submission of the Budget Proposal to the Legislature, 2013 ______________________ 38
2.5. Summary Assessment of Fiscal Forecasting and Budgeting__________________________________ 45
3.1. Selected Reports Relating to Fiscal Risk _____________________________________________________ 47
3.2. Sensitivity of Revenue, Expenditure and Balance, Share of GDP _____________________________ 49
3.3. Selected Specific Fiscal Risks ________________________________________________________________ 51
3.4. Selected Other Assets and Liabilities Not Reported, 2012 ___________________________________ 53
3.5. Summary Assessment of Fiscal Risk Analysis and Management _____________________________ 66
APPENDIX
I. Fiscal Transparency Action Plan ________________________________________________________________ 73

4

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

Glossary and Legend
BCG
EBU
FAD
FTC
FTE
GDP
GFS
GFSM
GFSY
GG
IPSAS
NWF
OECD
OEF
PDMR
PFR
RDIF
Rosstat
SDDS
SFA
SNA
SNA93
STA
VAT

Budgetary Central Government
Extra-budgetary Unit
IMF Fiscal Affairs Department
IMF’s Fiscal Transparency CodeFiscal Transparency Evaluation
Gross Domestic ProductGovernment Finance Statistics
Government Finance Statistics Manual
Government Finance Statistics Yearbook
General Government
International Public Sector Accounting Standards
National Wealth Fund
Organization for Economic Cooperation and Development
Other Economic Flows
Public Debt Management Report
Pension Fund of Russia
Russia Direct Investment FundFederal Statistics Service
Special Data Dissemination Standard
Stock-Flow Adjustment
System of National Accounts
1993 System of National Accounts
IMF Statistics Department
Value Added Tax

LEGEND FOR TABLES 1.7, 2.5, AND 3.5
Levels of Practice under Fiscal Transparency Code (July 2013 version)
LEVEL OFPRACTICE

Not Met

Basic

Good

Advanced

Levels of Importance to Fiscal Management
LEVEL OFIMPORTANCE

High

MediumLow

INTERNATIONAL MONETARY FUND

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RUSSIAN FEDERATION

PrefaceIn response to a request from the Ministry of Finance of the Russian Federation, a mission fromthe Fiscal Affairs Department (FAD) and Statistics Department (STA) of the International
Monetary Fund (IMF) visited Moscow during the period October 15-30, 2013 to conduct a pilot
Fiscal Transparency Evaluation (FTE). The mission was led by Richard Hughes and included Tom
Josephs and Gösta Ljungman (all FAD staff), Viera Karolova (STA staff), and Vladimir Krivenkov(FAD expert).
The objective of the mission was to evaluate Russia’s fiscal reporting, fiscal forecasting andbudgeting, and fiscal risk management practices against the standards set by the revised draft of
the IMF’s Fiscal Transparency Code (FTC).1 In the conduct of the evaluation, the mission met withrepresentatives from the Ministry of Finance, Federal Treasury, Ministry of Economic
Development, Ministry of Energy, Federal Statistics Service (Rosstat), Bank of Russia, Accounts
Chamber of the Russian Federation, Budget and Tax Committee of the State Assembly (Duma),
Economic Experts Group, and Gaidar Institute.
This evaluation is based on information available at the time it was completed in October 2013.
The findings and recommendations represent the views and advice of the IMF mission team anddo not necessarily reflect those of the government of the Russian Federation. Unless otherwise
specified, the data included in the text, figures, and tables in the report are estimates made by
the IMF mission team and not official estimates of the government of the Russian Federation.
The mission would like to thank the Russian authorities and other participants for their excellent
collaboration in the conduct of this pilot evaluation and for the frank and open exchanges ofviews on all matters discussed. Particular thanks go to Deputy Minister Alexei Lavrov, Andrey
Blokhin, Anna Belenchuk, and Aleksandr Zolotin for their support to the mission before, during,
and after its time in Moscow.

1

The evaluation was based on the version of the Code that was released for public consultation on July 1, 2013,
a copy of which can be found at www.imf.org/external/np/exr/consult/2013/fisctransp/index.htm.

6

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATIONEXECUTIVE SUMMARY
Most aspects of Russia’s fiscal reporting and budgeting practices are in line with good oradvanced practice under the July 2013 draft of the Fiscal Transparency Code, and thedisclosure and management of fiscal risks has significantly improved in recent years(Table 0.1). Specifically, over the past decade and a half:

the 1998 Budget Code and subsequent amendments have established a comprehensive legal
framework for fiscal management at all levels of government;the government began publishing cash-based in-year and year-end fiscal reports andaccrual-based annual financial statements as well as fiscal statistics which consolidate
Federal, regional, and municipal governments in line with international standards;

detailed and credible medium-term macroeconomic forecasts have been prepared since
early 2000, and a new oil price-based fiscal rule was introduced in 2013 to encouragesustainable and counter-cyclical fiscal policymaking;the coverage of the Federal government budget has steadily expanded and the three main
remaining extra-budgetary funds are presented and approved alongside it in a timely
manner;

the policy-orientation of the budget has improved thanks to a comprehensive and detailed
medium-term budget framework introduced in 2008, and a new program and performancebudgeting system introduced in the 2014 Budget; andfirm central controls over key sources of fiscal risks have been established, including annual
limits on the issuance of debt, credit, and guarantees by the Federal government, and on
borrowing by sub-national governments.2

At the same time, this evaluation highlights a number of important areas where fiscal
transparency practices could be further improved:

while fiscal reports provide a relatively comprehensive picture of the Federal and subnational government finances, they exclude the financial activity of various classes ofgovernment-controlled enterprises with net expenditure of at least 29 percent of GDP andliabilities of at least 127 percent of GDP in 2012;3

2

As a result of these successive enhancements to fiscal disclosure, between 2006 and 2012 Russia’s
rating under the International Budget Partnership’s Open Budget Index has risen from a score of 47
to 74 out of 100 and from a ranking of 28th out of 59 countries to 10th out of 100 countries.
3

Figures quoted here and in the remainder of this report are based on data from the 26 largest
government-controlled enterprises by liability.

INTERNATIONAL MONETARY FUND

7

RUSSIAN FEDERATIONgovernment balance sheets recognize most conventional financial and nonfinancial assets
and liabilities, but they exclude the government’s 200 percent of GDP in sub-soil oil and gas
assets and 287 percent of GDP in liabilities accrued to date from public pensions and publicprivate partnership (PPP) arrangements;

financial statements make no provisions for assessed but unlikely to be collected taxes or
non-repayment of the government’s 4 percent of GDP in loans, while budgets overstate
likely payouts against the government’s 2 percent of GDP stock of guarantees. In addition,
there are no regular estimates of the estimated 1-2 percent of GDP in annual revenue
foregone through tax expenditures;

while the Federal budget is relatively comprehensive, 14 percent is currently classified as
secret for national security reasons, and there are plans for extra-budgetary expenditure andlending via sovereign wealth funds;

there is scope to enhance the credibility, transparency, and scrutiny of official fiscal forecasts;and

reporting and analysis of near-term fiscal risks is incomplete and fragmented and forecastsof longer-term fiscal pressures to be published in 2014 will extend only to 2030.

Addressing these gaps in fiscal transparency practices would enable the government toprovide a more complete picture of its fiscal position, prospects, and risks. Based on datafor 2012, this more comprehensive view of public sector finances (summarized in Table 0.1)
would suggest that:

the public sector accounts for a considerable share of economic activity with revenues of atleast 71 percent of GDP, expenditures of at least 68 percent of GDP, and an estimatedsurplus of 3 percent of GDP;

the public sector has an extensive balance sheet with assets amounting to 381 percent of
GDP (200 percent in sub-soil assets, 82 percent in other fixed assets, and 100 percent infinancial assets) and liabilities amounting to 400 percent of GDP (282 percent in unfundedpension liabilities, 16 percent in other government liabilities, and 102 percent in net liabilitiesof public corporations); andestimates of the current net worth and projections of the long-term sustainability of the
public sector are highly sensitive to assumptions about future economic growth, oil
production and price developments, demographic trends, and other risks. Over the long-run,declining oil and gas revenues and rising pension and healthcare costs are likely to placeconsiderable pressure on the fiscal position.

This report makes nine recommendations aimed at enhancing the information base forfiscal decision-making and ensuring the country keeps pace with evolving internationaltransparency standards and practices. They are to:clarify the boundary between general government, public, and private sectors and expand
the institutional coverage of fiscal reports to encompass the whole public sector;

8

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

expand the coverage of balance sheets to include subsoil assets as well as pension andpublic-private partnership liabilities;enhance the consistency between budgets, statistics, and accounts in their treatment of noncash flows and valuation of fixed assets;

improve disclosure and management of the revenue foregone from tax expenditures;

improve the coverage and detail of the annual budget;enhance the independent scrutiny and transparency of the official macroeconomic and fiscal
forecasts;

improve the disclosure and analysis of fiscal risks;publish regularly long-term fiscal projections covering at least thirty years; andstrengthen the financial oversight of government-controlled enterprises.

The sequence of actions required to implement these reforms over the next five years have been
incorporated into a Fiscal Transparency Action Plan that is appended to this report.

INTERNATIONAL MONETARY FUND

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RUSSIAN FEDERATION

Table 0.1. Summary Assessment Against Fiscal Transparency Code (July 2013 version)

LEVEL OFIMPORTANCEHIGHIMPORTANCELEVEL OF PRACTICE

2. FISCAL FORECASTING
AND BUDGETING

1. FISCAL REPORTING

3. FISCAL RISK ANALYSISAND M ANAGEMENT

1.1. Structure of Public
Sector

1.2. Gross Budgeting

1.1. Macroeconomic Risks

1.2. Coverage ofInstitutions

1.4 Medium-term Budget
Framework

1.2. Specific Fiscal Risks

1.3. Coverage of Stocks

4.4 Fiscal Sustainability
Analysis2.2. Asset and Liability
Management

1.4. Coverage of Flows

5.2. Supplementary Budgets

2.3. Natural Resources

3.2. Data Consistency

5.3. Forecast Reconciliation

3.2. Public Corporations
3.4. Health and Social
Security

MEDIUM
IMPORTANCE

1.5. Tax Expenditures

1.1. Budget Unity

1.3 Comparability of Fiscal
Data

3.1. Classification

2.1. Fiscal Strategy Report

2.1. Contingency Reserves

3.3. Historical
Consistency

4.3. Citizens’ Budget

2.6. Financial Sector
Exposure

4.1 Statistical Integrity

5.1. Independent Evaluation

2.7. Major and Multi-Annual
Contracts
3.3. Quasi-Fiscal Activity

LOW
IMPORTANCE

2.1. Frequency of In-Year
Reports

1.3. Macroeconomic
Forecasts

2.4. Financial Derivatives

2.2. Timeliness of AnnualStatements

2.2.Budget Submission

2.5. Guarantees

4.2. External Audit

2.3. Budget Approval

2.8. Environmental Risks

4.3. Statistical
Dissemination

3.1. Organic Budget
Legislation

3.1. Sub-National
Governments

4.4. Reliability of Financial
Statements

3.2. Revenue Collection
4.1. Fiscal Policy Objectives
4.2. Performance Information

LEVEL OF PRACTICELEGEND10

Not Met

Basic

INTERNATIONAL MONETARY FUND

Good

AdvancedTable 0.2. Russia: Estimated Public Sector Finances Overview, 2012
(Percent of GDP)
General Government

Public Corporations

2
6

6

CentralSubnational

Consolidation

Total(Consolidated)

Net Lending/Net Borrowing
Revenue
Expenditure

2.7
30.4
27.7

0.4
25.0
24.6

-10.9
-10.9

3.0
44.4
41.4

-0.8
23.1
23.9

0.8
5.6
4.8

Net Financing

2.7

0.4

3.0

-0.8

0.7

1

NonFinancial
Financial

6

ConsoliTotal
dation (Consolidated)

0.0
0.0

-0.1
28.6
28.7

Consoli- Public Sector
dation (Consolidated)

-1.7
-1.7

-0.1

3.0
71.3
68.4
2.9

Acquisition of Financial Assets
Acquisition of Liabilities

3.6

1.4

-0.7

1.0

1.0

-0.7

Net Financial WorthFinancial Assets
5
Liabilities
Of which: Shareholders' equity

16.2

1.9

30.5
14.3

8.7
6.8

240.8

22.7

263.5

0.0

0.0

0.0

263.5

Nonfinancial Assets
Of which: Subsoil assets

224.6
200.0

20.8
0.0

245.4
200.0

31.2

4.9

36.1

281.5
200.0

Alt. Net Worth (incl. pensions)

-41.2
282.0

22.7
0.0

-18.5
282.0

3

Net Worth (excl. pensions)

Pension liabilities

10.3

-1.1

13.5

10.2

-0.8

10.4

-1.1

10.5

4.3

0.2

1.2

1.0

18.1

-31.2

-4.9

34.2
16.1

17.0
48.1
32.4

73.8
78.7
11.3

-36.1
0.0
0.0

90.8
126.9
43.7

-18.0
-25.2
-25.2
-11.4

99.7
117.7
32.3

-18.5
282.0

1/ Including Social Security Funds, consolidated
2/ Estimates based on the 26 largest corporations by liability.
3/ Net Worth refers to the difference between assets and liabilities (including shareholders' equity). For public corporations it equals to zero when the market price of equities
is not available.
4/ Central government: including PPPs assets of 2% of GDP (estimation)
5/ Central government: including government pension liabilities of 3% of GDP and PPPs of 2% of GDP (estimation)
6/ The totals are consolidated, i.e. intra-flows/stocks within the related sector are eliminated.

11

RUSSIAN FEDERATIONINTERNATIONAL MONETARY FUND

4

-5.0
-5.0

10.9

-0.8

RUSSIAN FEDERATION

I. FISCAL REPORTING
1.0. Introduction
1.
Fiscal reports should provide a comprehensive, timely, reliable, comparable, andaccessible summary of the government’s financial performance and position. This chapter
assesses the quality of fiscal reporting practices against those set out in the July 2013 draft of the
IMF’s Fiscal Transparency Code. In doing so it separately considers the following dimensions offiscal disclosure:i.

coverage of public sector institutions, stocks, and flows;ii.

frequency and timeliness of reporting;iii. quality, accessibility, and comparability of fiscal reports; andiv. reliability and integrity of reported fiscal data.
2.
Fiscal reporting is characterized by a high degree of uniformity, frequency, andtimeliness. All government units follow a uniform budget classification, chart of accounts,
and reporting format. The main in-year and annual fiscal reports, summarized in Table 1.1,
cover the consolidated accounts for central, regional, and municipal governments. Monthly,quarterly, and year-end budget execution reports prepared by the Federal Treasury include cash
revenue, expenditure, financing, and debt and are classified according to the standardized
national budget classification. Year-end budget execution and financial statements also
produced by the Federal Treasury present both cash and accrued revenues, expenditures, andfinancing and include a balance sheet of financial and (above ground) nonfinancial assets andliabilities also based on the national budget classification. Finally, monthly and annual fiscal
statistics produced by the Treasury and Federal Statistics Service (Rosstat) respectively follow the
IMF’s Government Finance Statistics Manual 2001 standards, though, as discussed below, thecoverage is not complete.

12

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

Table 1.1. Russia: List of Fiscal Reports
COVERAGEREPORTACCOUNTING

Institutions

Flows

Stocks

Basis

Class

GG, except

Rev, Exp,

EBU

Fin

Debt

Cash

Nat

GG, except

Rev, Exp,

EBU

Fin

Debt

Cash

Nat

GG, except

Rev, Exp,CG Debt

Cash

EBU

Fin

GG, except

Rev, Exp,

Debt

Cash

EBU

Fin

Financial

GG, except

Rev, Exp,

Assets,AccrualStatements

EBU

Fin

Liab

Rev, Exp,

Assets,Fin, OEF

LiabRev, Exp

None

Cash

Rev, Exp

Debt

Cash

PUBLICATION
Non-tax

Freq

Date

Gross

M

30 daysGross

Q

35 daysGross

M

60 days

Nat

Gross

A

Nat

Gross

A

Gross

A

Gross

A

Rev

IN-YEAR REPORTS
Monthly Budget
Execution
Quarterly Budget
Execution
Fiscal Statistics

GFSM
2001

YEAR-END REPORTS
Budget Execution

GG
Fiscal Statistics

GG, except
EBU

Accrual

GFSM
2001
SNA
1993

5
months5months10months18
monthsFISCAL FORECASTS

Main Directions ofBudget Policy

BCG

Nat

GG

Rev, Exp

None

Cash

Nat

BCG

Rev, Exp, Fin

Debt

Cash

Nat

Rev, Exp, Fin

None

Cash

Nat

Rev, Exp, Fin

Debt

Cash

Nat

Gross
A

Jul

A

Oct

A

Oct

A

Oct

Gross

BUDGETS

Budget Proposal

GG, except
EBU
GG

Gross (excl
self-finance)
Gross (excl
self-finance)
Gross (excl
self-finance)

Note: GG: general government, BCG: budgetary central government, EBU: extra-budgetary units (EBUs include budgetary andautonomous units, the Housing and Communal Services Reform Fund, Russian Nanotechnology Corporation, and the RussianRoad Company). Rev: revenue, Exp: expenditure, Fin: financing, OEF: other economic flows, Liab: liabilities.

INTERNATIONAL MONETARY FUND

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RUSSIAN FEDERATION

1.1. Coverage of Fiscal Reports
1.1.1. Structure of the public sector (Basic)
3.
As of October 2013, the public sector comprised 81,954 separate institutional
entities of various legal forms. As shown in Table 1.2 this includes:
12,402 budgetary central government entities including federal government ministries,
agencies, budgetary organizations, and legislative and judiciary bodies who receive all of
their funding from the Federal Budget and keep their accounts with the Federal Treasury;

4,389 central extra-budgetary organizations. These autonomous and semi-autonomous
government entities are partially financed by transfers from the Federal budget and partly by
payments from the beneficiaries of their services;4

87 social security funds including the Federal Pension Fund, Social Insurance Fund, andMandatory Medical Insurance Fund as well as 84 regional governments. These funds dependon transfers from the Federal budget for 47 percent of their revenue;23,185 sub-national governments including 83 state (regional) governments (46 oblasts,
21 republics, 9 areas, 2 federal cities, 4 autonomous regions, and 1 autonomous oblast) and
23,102 local governments (municipalities). Regional governments partly depend on transfersfrom central government, while municipalities partly depend on transfers from the regions;

31,092 public corporations comprised of 22,440 unitary enterprises, 308 government
corporations (11 financial and 297 nonfinancial) and 8,344 joint stock companies; and

10,799 other, unspecified government-controlled entities included in the official statisticalregister of the Federal Statistics Service (Rosstat).

4.
The government maintains but does not publish a comprehensive register of all
public entities. For the purpose of compiling economic statistics in line with the 1993 System of
National Accounts (SNA93), Rosstat maintains a relatively comprehensive register of government
units and public corporations. However, this statistical register is currently under review because
it does not classify these entities to these sectors according to international standards, as
discussed below. The Treasury maintains a separate register of government entities for the
purpose of compiling accounts but this does not cover all government-controlled entities as
defined by international standards or include any public corporations. In addition, the list of
individual units included in the general government is not consistent between the two registers.5

4

GFSM2001-based statistics also include three non-market enterprises in this category: the Housing andCommunal Services Reform Fund, Russian Nanotechnology Corporation, and the Russian Road Company.
5

According to Rosstat’s statistical register, the general government comprises 41,891 entities. According to theTreasury’s accounting register, the general government comprises 40,063 entities.

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INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

Table 1.2. Russia: Estimated Public Sector Institutions and Finances(Percent of GDP, 2012)
Numberofentities

Revenue

1

1

Expend1
iture

Balance

2

3=1-2

2

Net
impactoftransfers

Net
Balance

4

5=3-4

I. GENERAL GOVERNMENT (Consolidated)

40,063

44.4

41.4

3.0

-0.8

3.8

Central government (Consolidated)

16,878

30.4

27.7

2.7

-4.0

6.6

Budgetary central government

12,402

22.4

20.2

2.2

-11.5

13.7

Extrabudgetary units/entities

4,389

2.5

2.7

-0.3

0.3

-0.6

87

13.5

12.7

0.7

7.3

-6.5

23,185

25.0

24.6

0.4

3.2

-2.8

State governments

83

16.3

16.1

0.3

-1.1

1.3

Local governments

23,102

8.6

8.5

0.1

4.2

-4.1

41,891

28.6

28.6

-0.1

0.8

-0.9

71.3

68.3

3.0

0.0

3.0

Social security Funds
Subnational government, (Consolidated)

II. PUBLIC CORPORATIONS (Consolidated)
Unitary enterprises
Government corporations

22,440308

Joint-stock companies

8,344

Other government controlled enterprises

10,799III. PUBLIC SECTOR (Consolidated)

81,954

1/ Consolidated revenue/expenditure at the subsector and sector level exclude intra-flows within the related subsector/sector.
2/ Net Lending/Borrowing
Source: Number of units: Rosstat as of October 2013; GFSM 2001 data for GG and staff estimates based on annual reports ofthe 26 largest public corporations.
Note: Consolidation reflects current and capital transfers, subsidies and dividends. Taxes paid by public corporations togovernment are not consolidated.

5.
The definitions of the general government and public sector do not follow
international standards and differ across fiscal reports. The Federal Treasury defines thegeneral government based on the legal status of each entity rather than on the “market test”
used in international statistical standards.6 As a result, some of the 31,092 entities classified by
the Federal Treasury as “commercial” in legal form, and therefore excluded from fiscal reports,
would likely fall within the general government based on the market test. The sector
classification applied in Rosstat’s general government fiscal statistics include some of these
entities but also do not systematically apply the market test to the different classes of entities.
These differences in the coverage of general government entities likely account for some of theup to 1.8 percent of GDP discrepancy in the general government net lending/borrowing
between Rosstat’s national accounts and the Treasury’s government finance statistics.

6

The market test looks at an entity’s source of financing (government vs. corporation sector) and the economic
significance of the prices it charges. Economically significant prices are prices that have a significant effect on theamounts that producers are willing to supply and on the amounts purchasers wish to buy.

INTERNATIONAL MONETARY FUND

15

RUSSIAN FEDERATION

1.1.2. Coverage of institutions (Good)
6.
Based on a data from the country’s 26 largest public corporations, the consolidated
public sector accounted for at least 68 percent of GDP by expenditure in 2012. Within this,central government net expenditure (i.e., excluding the impact of transfers to other public sector
units) accounts for 33 percent (22 percent of GDP), sub-national governments for about
26 percent (18 percent of GDP), and public corporations for at least another 41 percent(28 percent of GDP) of consolidated public sector expenditure.7
7.
The most comprehensive fiscal reports cover the consolidated general government
as defined in national legislation and about 60 percent of public sector expenditure. The
Treasury’s budget execution reports and financial statements cover most non-corporate central
and sub-national government entities but leave out three extra-budgetary entities (the Housing
and Communal Services Reform Fund, Russian Nanotechnology Corporation, and Russian Road
Company), whose net expenditure accounts for 2.7 percent of GDP. Rosstat’s annual GFSM 2001based fiscal statistics also consolidate these three entities (Figure 1.1).
Figure 1.1. Russia: Coverage of Public Sector in Fiscal Reports, 2012
(Percent of Expenditure)

Source: GFSY, staff estimates, annual reports of 26 largest public corporations.

7

Comprehensive financial data on Russia’s public corporations are not available. The figures quoted here and in
the rest of the report for the size of the public corporations sector and consolidated public sector are based ondata from the country’s 26 largest public corporations by liability.

16

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

8.
However, the very large public corporation sector is not covered by any
consolidated fiscal report. As discussed in the previous section, none of Russia’s consolidated
fiscal reports cover the large number of entities classed as commercial enterprises in national
legislation, some of which would likely be classified as general government entities underinternational standards. While financial reports for individual government enterprises arecollected by different ministries and government agencies, aggregated information on thefinancial position and performance of the whole public sector does not exist. However, thegovernment recently committed to publishing fiscal statistics for the consolidated public sector,
with preliminary estimates to be published in 2016-18. A project group has been establishedbetween the Ministry of Finance, Federal Treasury, Rosstat, and the Central Bank to: (i) define thescope of the public sector; (ii) establish a database covering all public corporations; and(iii) report statistics for the consolidated public sector in national accounts, financial accounts
and balance sheets, and government finance statistics.
9.
Expanding the institutional coverage of fiscal reports from the general government
to encompass the wider public sector would significantly increase total revenue andexpenditure but not significantly alter the overall balance. For example, for 2012,
incorporating into the fiscal accounts of the largest 26 public corporations, would add a further
27 percent of GDP to expenditure and revenue. Since most of these corporations run operatingbalances, consolidating them into public sector accounts does not materially alter the overall
fiscal surplus of 3 percent of GDP in 2012.
Figure 1.2. Russia: Public Sector Gross Liabilities(Percent of GDP)
General Government

Public Enterprises

350
300

250
200
150
100
50

0
Australia

NZ

CanadaRussiaIcelandUK

Source: Staff estimates; National budgets. Data for Russia cover only the 26 largest public corporations, 2012. Data forother countries is from 2008-12.

10.
In addition to their sizeable revenues and expenditures, public corporations also
have very large asset and liability holdings, relative to both the government and to public

INTERNATIONAL MONETARY FUND

17

RUSSIAN FEDERATION

corporations in other countries. As shown in Figure 1.3, the largest 26 public corporations had
liabilities of around 102 percent of GDP compared with general government liabilities of only
11 percent of GDP in 2012. Understanding the financial position of these entities and theirrelationship with the government is therefore critical to understanding the financial position andsustainability of Russia’s public sector as a whole.

1.1.3. Coverage of stocks (Good)
11.
A consolidated general government balance sheet is published on an annual basis.
This information on the general government’s fixed and financial assets and liabilities ispublished on an annual basis in the Treasury’s year-end financial report and Rosstat’s
government finance statistics. As shown in Table 1.3, the balance sheet for 2012 provides adetailed breakdown of the general government’s 11 percent of GDP in liabilities, 34 percent of
GDP in financial assets, 43 percent of GDP in nonfinancial assets, and an overall net worth of
67 percent of GDP.
Table 1.3. Russia: Reported General Government Balance Sheet, 2012
(Percent of GDP)
Central Government

Budgetary

Extra-

Socialbudgetary

Security

CentralGovernment

State

Local

Government Government

GeneralGovernment(Consolidated)(Consolidated)

Nonfinancial assets

20.1

2.3

0.1

22.6

12.1

8.7

43.4

Fixed assets

14.5

2.2

0.1

16.8

10.9

6.6

34.3

Inventories

5.0

0.1

0.0

5.2

0.4

0.2

5.7

Nonproduced assets

0.6

0.0

0.0

0.6

0.9

1.9

3.4

29.7

-0.9

3.6

30.5

6.1

2.5

34.2

Currency and deposits

9.8

0.3

4.2

14.3

1.2

0.4

15.9

Securities excl. shares

0.0

0.0

0.2

0.2

0.0

0.0

0.3

Loans

4.2

0.0

0.0

4.2

0.2

0.0

3.7

Shares & other equity

11.6

0.2

0.0

10.0

6.5

3.3

15.7

Other assets

4.1

-1.5

-0.8

1.7

-1.9

-1.2

-1.4

9.0

2.2

0.0

9.3

4.7

2.1

11.1

Securities excl. shares

8.2

0.0

0.0

8.2

0.6

0.0

8.8

Loans

0.2

0.2

0.0

0.4

1.4

0.3

1.4

Shares & other equity

0.0

1.9

0.0

0.1

2.6

1.6

0.1

Other liabilities

0.5

0.1

0.0

0.6

0.2

0.1

0.9

40.8

-0.8

3.7

43.8

13.5

9.2

66.5

Financial assets

Liabilities

NET WORTH
Source: GFSY, 201212.
However, this balance sheet does not reflect the true value of some general
government assets and liabilities and excludes those held by public corporations. As shownin Table 1.4 and Figure 1.2, consolidated public sector asset holdings (covering the general
18

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

government sector and the largest 26 largest corporations) are estimated to be at least
381 percent of GDP and its liabilities are estimated to be around 400 percent of GDP in 2012.
The differences between these figures and those reported in financial statements and statistics
reflect the fact that:

the government has unrecognized subsoil assets of around 200 percent of GDP, as discussed
further in Section 3.2.3;

the government has unreported liabilities for pension rights accrued to date of around
285 percent of GDP, as discussed further in Section 3.2.2;

the government has growing obligations under public private partnership (PPP) contracts
estimated at 2 percent of GDP, as discussed further in Section 3.2.7;

public corporations have 97 percent of GDP in liabilities to the private sector and
127 percent of GDP in fixed and financial assets, as discussed further in Section 3.3.2; and

finally, though not reflected in the above estimates, government holdings of nonfinancial
assets are most likely significantly underestimated, as they are reported in the balance sheet
at historical prices, and do not take into account subsequent price changes. It is estimatedthat there is at least a ten-fold difference between the historical and market value of theseassets. In addition, shares and other equities are not recorded in market prices.
Figure 1.3. Public Sector Balance Sheet Coverage in Fiscal Reports, 2012
(Percent of GDP)

General Gov't
Non-Fin Public Corp

Reported
Unreported

Fin. Public Corp.

Unreported (pensions)
Central Bank

Liabilities

AssetsConsolidation
Public Sector
Net Worth (excl. Pensions)
Adj. Net Worth (incl. Pensions)

-500

-300

-100

100

300

500

Source: GFSY 2012, staff estimates

INTERNATIONAL MONETARY FUND

19

RUSSIAN FEDERATION

Table 1.4. Russia: Estimated Public Sector Balance Sheet, 2012
GENERAL GOVERNMENT (Consolidated)

Billions ofPercent of

RublesGDP

Nonfinancial assets

27,167

43.4

Financial assets

21,403

34.2

Liabilities

6,966

11.1

Net Worth

41,605

66.5

Subsoil assets

125,198

200.0

PPPs assets

1,252

2.0

Pension liabilities

1,850

3.0

PPPs liabilities

1,252

2.0

Net Worth (excluding PAYGO pensions)

123,348

197.0

Unfunded PAYGO pension liabilities

176,529

282.0

Net Worth (including PAYGO pensions)-53,181-85.0

Nonfinancial assets

153,617245.4

Fin assets

21,403

34.2

Total

Liabilities

10,06816.1(Not Reported)

Net Worth (excluding PAYGO pensions)

164,953

263.5

Unfunded pension liabilities

176,529

282.0

Net Worth (including PAYGO pensions)-11,577-18.5

Nonfinancial assets

22,59936.1

Financial assets

56,82090.8

Liabilities

79,418

126.9

0.0

0.0

Nonfinancial assets

176,216

281.5

Financial assets

62,437

99.7

Total

Liabilities

73,700117.7(Not Reported)

Net Worth (excluding PAYGO pensions)

164,953

263.5

Unfunded PAYGO pension liabilities

176,529

282.0

Net Worth (including PAYGO pensions)-11,577-18.5

Reported

Not Reported

PUBLIC CORPORATIONS

Not Reported

Net Worth
PUBLIC SECTOR (Consolidated)

Source: GFSY 2012, staff estimates

13.
Taking a more comprehensive view of the public sector balance sheet substantiallyalters the estimated fiscal position, though the estimate of overall public sector net worth
is highly sensitive to underlying assumptions. As shown in Figure 1.4, consolidating thegovernment’s sub-soil assets, PPPs, funded pensions, and balance sheets of the 26 largest public
corporations delivers an overall net worth for the public sector of positive 264 percent of GDP.

20

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

However, a more comprehensive measure which also includes 282 percent of GDP in unfunded
pay-as-you-go pension obligations delivers an overall public sector net worth of minus
19 percent of GDP if these long-term obligations are recognized as liabilities (Table 1.4).
Figure 1.4. Public Sector Net Worth in Selected Countries(Percent of GDP, 2012)
100
75
50
25
0
-25
-50
-75
-100
-125
RussiaRussia Australia(excl.
(incl.
pensions) pensions)

NZ

Iceland

CanadaFranceUK

US

Source: Staff estimates, national budgets and statistical agencies.
Note: The figure presents data on net worth for countries where such estimates were available. For other countries these are
estimates for 2010-11 covering nonfinancial and financial assets and liabilities as well as pension liabilities. The data for Russia
present estimates for 2012. Pension estimates refer to unreported civil service pension obligations accrued to date.

1.1.4. Coverage of flows (Good)
14.
Budget execution reports are cash-based, but annual financial statements provide
accrual data for the general government. According to the Budget Code, the national
accounting rules take into account international standards for financial reporting of public units
such as GFSM 2001 and IPSAS. Cash-based budget execution reports provide a detailed
breakdown of revenue receipts, expenditure payments, and financing. However, the financial
statements record individual revenue, expenditure and outstanding amounts of assets andliabilities on an accrual basis, e.g., expenses and the related payables are recorded when goods
and services are delivered and not when government makes cash payment.
15.
However, not all accrued flows are fully or appropriately captured in financial
statements. For example, reported tax revenue is based on assessments and declarations, andprovisions for amounts unlikely to be paid are not created. The same is true for the treatment of
the 4 percent of GDP in government loans, where no provision was made for write-offs in 2012.

INTERNATIONAL MONETARY FUND

21

RUSSIAN FEDERATION

In addition, pension liabilities from the state-funded pension scheme and the related flows areomitted from official fiscal reports. Finally, changes in market prices of stocks of fixed assets andshares and other equities are not reflected as other economic flows that affect net worth.
16.
In addition, there are some inconsistencies in the treatment of non-cash flows
across different types of fiscal reports. In particular, government budgets include provision fornearly the full amount of guarantees issued each year (RUB 115 billion or 0.2 percent of GDP in2012) which tends to overstate forecast liabilities as only 5 percent of the total value guarantees
have been called over 2012-13. Furthermore, there are large accrued rents to Federal and subnational governments in fiscal statistics for which no cash counterpart can be identified. The
resulting differences between accrual and cash transactions are noticeable, as shown in
Table 1.5, with accrued revenues consistently exceeding cash receipts by 4-7 percent of GDP and
the accrual balance consistently exceeding the cash balance by 0.2 to 1.4 percent of GDP
between 2009 and 2012. The differences between accrual and cash revenue and expenditure areto a large extent reflected in other (unspecified) accounts receivable/payable in the balance
sheet.
Table 1.5. Russia: Difference between Accrued and Cash Revenue and Expenditure(Percent of GDP)
General Government
Revenue
Taxes
Social contributions
GrantsOther revenue
Expenditure
Employee compensation
Goods and services
Interest
Subsidies
GrantsSocial benefits
Other expense
Net acquisition of NFA
Net lending / borrowing
Net impact of other accounts
receivable/ payable

Federal Budget

Sub-national Govts

2009
6.5
0.1
0.1
0.0
6.3
6.3
1.0
1.5
0.0
3.6
0.0
-0.1
0.1
0.2
0.2

2010
4.1
-0.2
0.0
0.0
4.3
3.0
0.0
1.6
0.0
1.8
0.0
-0.1
0.1
-0.4
1.1

2011
7.4
-0.6
-0.1
0.0
8.1
6.7
0.8
0.9
0.0
1.8
0.0
0.6
0.1
2.5
0.7

2012
4.9
0.2
-0.2
0.0
4.9
3.7
0.0
0.9
0.0
2.4
0.0
0.0
0.1
0.2
1.2

2009
0.7
0.0
0.0
0.0
0.7
0.8
0.0
0.3
0.0
2.3
0.1
0.0
0.0
-1.9
-0.1

2010
1.7
-0.2
0.2
0.0
1.8
1.0
0.0
0.6
0.0
0.4
0.2
0.0
0.0
-0.2
0.8

2011
3.7
-0.3
0.0
0.0
4.0
2.5
0.0
-0.1
0.0
0.1
0.1
-0.1
0.0
2.5
1.3

2012
2.3
0.1
0.0
0.0
2.2
0.6
0.0
0.0
0.0
0.5
0.1
0.0
0.0
0.1
1.6

2009
6.3
0.1
0.0
0.6
5.5
6.2
1.0
1.1
0.0
1.3
0.5
0.1
0.1
2.2
0.1

2010
3.0
0.1
0.0
0.5
2.4
2.5
0.0
0.8
0.0
1.4
0.3
0.0
0.1
-0.1
0.5

2011
3.5
-0.3
0.0
0.2
3.6
3.7
0.8
0.9
0.0
1.7
0.2
0.1
0.0
0.1
-0.2

2012
3.7
0.1
0.0
0.5
3.1
3.4
0.0
0.9
0.0
2.1
0.5
0.0
0.0
0.0
0.3

0.6

1.3

0.0

1.0

0.4

1.0

0.3

1.4

-0.1

0.4

-0.9

-0.4

Source: GFSM 2001, staff estimates

1.1.5. Tax expenditures (Basic)
17.
There is limited disclosure of revenue loss due to tax reliefs and tax subsidies. By
making exceptions in the tax system for certain taxpayers, activities or transactions—in the formof deductions, exemptions, allowances, rate reliefs, deferrals, or credits—the government decides
to forgo revenue that otherwise would have been collected. Since the foregone revenue benefits
some tax payers and not others, it is akin to a subsidy on the expenditure side of the budget. To
fully capture the redistribution of economic funds through the budget, the extent of the loss ofrevenue through tax expenditure should be disclosed.

22

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

18.
While there have been efforts to estimate the size of tax expenditures, thegovernment does not have an official methodology for calculating tax expenditures.
Tax expenditures are difficult to measure directly. To make an estimate of the revenue loss, abenchmark tax—defined as the rate structure, deductions, and accounting treatment prevailingin the absence of any tax expenditures—must be identified. Tax expenditure analysis also
requires a choice between three estimation methodologies, based on either revenue foregone,revenue gain, or outlay equivalent. No official approach has yet been agreed by the Russian
government.
19.
Preliminary unofficial estimates indicate federal tax expenditures in the range of
1-2 percent of GDP in 2010. This would put the size of tax expenditure toward the low end
compared with a sample of advance countries included in a recent OECD survey, as shown in
Figure 1.5. However, these estimates exclude the foregone tax from corporations operating inthe 24 Special Economic Zones which offer generous tax incentives. Given that several initiatives
to stimulate innovation through tax exemptions have been taken in recent years—for example in
the area of energy efficient equipment and regional development—the estimate is likely on the
low side and revenue loss from tax expenditures is likely to grow. As indicated above, theseestimates are also sensitive to the definition of the benchmark tax, in particular whether VAT on
certain services are included.
Figure 1.5. Tax Expenditures(Percent of GDP)
9

8
7
6
5
4
3
2
1
0
Germany

Netherl.

Korea

RussiaSpain

CanadaUS

UK

Note: Estimates for the year 2008, except Germany: 2006; Netherlands: 2006; Korea: 2006; and Canada 2004. Dark and light
blue colors for Russia illustrate two different estimates for the size of tax expenditures.
Sources: Tax Expenditures in OECD Countries (2010); T. Malinina (2010); Estimates of Tax Expenditures and Reliefs: International
Experience and Russian Practice.

INTERNATIONAL MONETARY FUND

23

RUSSIAN FEDERATION

1.2. Frequency and Timeliness of Fiscal Reporting
1.2.1. Frequency of in-year reports (Advanced)
20.
Cash-based in-year budget execution reports and in-year fiscal statistics areproduced with a high degree of frequency and timeliness. Cash-based budget execution
reports are produced on a monthly basis and published within 30 days of the end of eachmonth. Quarterly reports are available 35 days after the end of the quarter. These budget
execution reports are also translated into the monthly cash-based GFSM 2001 statistical format
and published within two months.

1.2.2. Timeliness of annual financial statements (Advanced)
21.
Annual accounts covering the Federal government budget and the consolidated
budgets of the Russian Federation are published within five months of the end of thefinancial year. Under the Budget Code, Russia produces two sets of annual accounts covering
all nationally-defined general government entities. First, a cash-based annual budget execution
report shows government revenues, expenditure, and financing for the previous year. Second, anaccrual-based financial statement provides an income statement, balance sheet, and cash flow
statement for the previous year. Both reports are published within five months of the end of theyear.

1.3. Quality of Fiscal Reports
1.3.1. Classification (Good)
22.
Fiscal reports include an administrative, economic and functional classification.
The administrative classification reflects the existing structure of the budgetary units. The
uniform chart of accounts employed by all nationally-defined general government entities allows
for the compilation of consolidated fiscal reports for the nationally-defined general government
sector which generally follow GFSM 2001 economic and functional classifications. As discussed in
Section 2.4.2, a program classification is currently being prepared for the 2014 budget which will
also be incorporated into ex post fiscal reports.
23.
However, there are several differences between the national and GFSM 2001
classification rules. In particular, according to national budgetary rules, “above the line”
transactions include outflows due to the acquisitions of shares and other equities. Such
operations are treated as financial (“below the line”) transactions in GFSM 2001, on theassumption that the government has acquired a financial asset which will generate a sufficient,market rate of return. Another example is the treatment of holding gains from sales of
nonfinancial assets which are treated as revenue in the budget execution reports, but in GFSM
2001 are defined as other economic flows not impacting the operating balance. Finally, external
debt is defined by the Budget Code as debt in foreign currency, while according to international
standards it should refer to the holdings of debt by non-residents.

24

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

1.3.2. Data consistency (Basic)
24.
Annual government finance statistics and accounts provide a reconciliation ofabove and below-the-line transactions. However, this is only one of the three internalconsistency checks called for under the July 2013 draft of the Fiscal Transparency Code. The
government does not publish consistency checks that explain either the stock-flow adjustments
in government finance statistics or the differences in government debt issuance figures compiledby the Treasury and government debt holdings compiled by the Central Bank. In addition, as
discussed in Section 1.1.4, there are significant unexplained differences between the net
lending/borrowing compiled by the Treasury and Rosstat.
25.
Stock-flow adjustments (SFAs) are significant and have been especially large inrecent years. A shown in Figure 1.6 and Table 1.6, these differences in the change in debt andnet lending/borrowing have averaged 1.9 percent of GDP over 2009-12 compared with
1.1. percent of GDP in EU countries. SFAs were particularly large in 2011 and 2012 (5.2 and
4.3 percent of GDP respectively) indicating that the government issued debt, despite of thepositive performance (surpluses). The borrowed funds were deemed to be used for acquisitionsof financial assets—shares and equities. Changes of the value of foreign currency-denominateddebt which are not captured in financial statements may also account for some of thisunexplained discrepancy between stock and flow figures. The absence of information explaining
the SFA elements may give rise to doubts concerning the correctness of the treatment of someflows and stocks and ultimately on the reliability of the main fiscal aggregates.
Figure 1.6. Russia: Stock Flow Adjustments(Percent of GDP)
6

Discrepancy
42Volume changes in the debt
Net acquisition of financial assets

0

-2

-4

2009

2010

2011

2012

Source: IMF Government Finance Statistics Yearbooks

INTERNATIONAL MONETARY FUND

25

RUSSIAN FEDERATION

Table 1.6. Russia: Sources of Stock-Flow Adjustments(percent of GDP)
2009

2010

2011

2012

Net borrowing(+)/lending(-)

4.6

1.4

-3.4

-3.0

Net acquisition of financial assets

-3.4

0.2

5.1

4.3

Currency and deposits

-4.8

-1.5

3.0

1.6

Securities other than shares

-0.1

0.0

-0.3

0.0

Loans

-0.6

-0.1

0.2

0.1

Shares and other equity

0.6

0.9

2.4

1.6

Other financial assets

1.5

0.9

-0.1

0.9

Adjustments

1.1

0.2

0.0

0.0

Revaluation of the debt

0.0

0.0

0.0

0.0

Volume changes in the debt

1.1

0.2

0.0

0.0

Discrepancy

-0.1

0.0

0.0

0.0

Change in the debt

2.3

1.9

1.8

1.3

Stock-Flow Adjustments

-2.3

0.4

5.2

4.3

Source: GFSM 2001
Note: Net lending/borrowing is here reported using reverse sign convention, e.g., surpluses are recorded as
negative figures contributing to the reduction of debt.

1.3.3. Historical consistency (Basic)
26.
While revisions to historical fiscal data have typically been small, a major revisionof fiscal data for 2009 led to a 9.5 percent of GDP increase in net borrowing. This revision
related to the exceptional flow which was not recorded in financial statements in line with the
GSFM 2001 methodology. Before 2009, according to the national accounting rules, holdings ofgovernment shares and equities had not been reported among government assets. A decision to
include them into the balance sheet led to the inclusion of large one-off receipt to government
in 2009 financial statements. Treatment of this inflow was reconsidered by statisticians in 2011
and reclassified as another economic flow that did not count as revenue and therefore requireda large upward revision to reported borrowing in 2009.
27.
Historical statistics are not reviewed on regular basis to take into account new
information on public finances. Apart from the exceptional revision for 2009, there have notbeen any revisions to historical fiscal data. Because Russian GFS reports are based on final data
sources, the authorities state that revisions due to new information are not needed. This does
not follow the practice in most advanced countries where historical data are routinely updated toreflect new information on government finances—in particular on specific governmenttransactions (e.g., capital injections, super-dividends, debt assumptions, or debt cancellation),changes in the sector delimitation, identification of non-compliant treatments of flows andstocks in the nationally based reports, or accounting errors uncovered by the auditor. These

26

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

updates are incorporated into historical statistical reports and explained to ensure a consistentand accurate time-series.

1.4. Integrity of Fiscal Reports
1.4.1. Statistical integrity (Good)
28.
Comprehensive GFSM 2001-based fiscal statistics are produced and disseminatedby the Federal Treasury. The Treasury is a semi-autonomous institution under the Ministry of
Finance, and an executive order establishes that fiscal statistics are to be based on accounting
data and compiled in accordance with international standards. While Rosstat functions under
the Ministry of Economic Development, it was granted professional independence by the 2008
Statistical Law. However, Rosstat compiles only annual government nonfinancial national
accounts according to SNA methodology and with a delay of almost two years.

1.4.2. External audit (Good)29.
The annual budget execution reports and financial statements are audited
independently by the Chamber of Accounts in line with the Constitution. Under Article 7 of
the Federal Law on the Audit Chamber, the chair of the Chamber of Accounts is proposed byPresident and appointed by the Parliament for the period of six years. He or she can only beremoved from office for gross misconduct and following a resolution passed by both Houses ofParliament. The conclusions of the audit report are presented to Parliament alongside the final
versions of the statements themselves by the start of September. However, the report does notprovide an opinion as to whether the financial statements present a true and fair view of thegovernment’s financial position.

1.4.3. Statistical dissemination (Good)
30.
Fiscal statistics meet the IMF’s Special Data Dissemination Standard (SDDS).
The Federal Treasury produces and publishes monthly cash-based and annual accrual-based
government finance statistics in accordance with the SDDS requirements, using a flexibility
option on the timeliness of the monthly data. The authorities are currently working on preparing
quarterly data on general government operations on accrual basis. To meet SDDS plus
standards, Russia would need to publish quarterly data on general government within 12 months
and quarterly debt within four months after the end of the reference quarter.

1.4.4. Reliability of financial statements (Good)
31.
Annual accounts meet national accounting standards and their reliability isvalidated by the Account Chamber. Russia has applied a national accrual-based accounting
standard for all government entities since 2006. The audit report of the Accounts Chamber
typically includes a number of recommendations for improving the construction andpresentation of the accounts based on this standard. There is an ongoing project to introduce
IPSAS, even though not all IPSAS standards have been issued. The new accounting standard for
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RUSSIAN FEDERATION

government would bring the classification of revenue and expenditure in line with the generally
accepted international accounting standard and improve the valuation and recognition of assets
including subsoil assets and land. However, it is not envisaged that the new standard will require
the recognition of accrued pension liabilities in balance sheets.

1.5. Conclusions
32.
Fiscal reports meet either good or advanced practices in most areas, but there is
scope for improvement in several areas. Table 1.7 summarizes the quality of Russia’s fiscal
reporting relative to the standards set by the July 2013 draft of the Fiscal Transparency Code as
well as the relative importance of each area. This assessment highlights a number of areas wherereporting can be improved. These include:accounts and fiscal statistics limit their coverage to general government units and do notreflect the significant financial activity of publicly-controlled corporations;summary balance sheet data does not include the government’s significant subsoil assets,pension liabilities, and PPP obligations;

fiscal reports do not include provisions for non-recoverable taxes and loans and assets arerecognized at historical cost rather than market value; andthere is no regular estimation or active management of the revenue loss from tax
expenditures.

Chapter IV includes a series of recommendations for how fiscal reporting can be enhanced inthese areas by consolidating available fiscal information into a new set of more comprehensive
summary fiscal reports.

28

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

Table 1.7. Russia: Summary Assessment of Fiscal Reporting*
PRINCIPLEASSESSMENT

IMPORTANCE**

REC

1.1

Structure of the
Public sector

Basic: The government maintains aregister of public sector entities

High: Significant proportion of 41,891 public
corporations may belong in general government1

1.2

Coverage ofInstitutions

Good: Fiscal reports consolidate all
general government units

High: Public corporations with expenditure of 28%
of GDP in 2012 outside consolidated fiscal reports1

1.3

Coverage ofStocks

Good: Fiscal reports cover all conventional
financial and nonfinancial assets andliabilities

High: Subsoil assets of 200% of GDP and pensions
liabilities of 285% of GDP not included in balance
sheets.

2,3

1.4

Coverage of
Flows

Good: Fiscal reports cover cash andaccrued revenues and expenditures

Medium: Non-recognized non-recoverable claims of
0.4% of GDP reduce reliability of the fiscal balances

3

1.5

Tax
Expenditures

Basic: There is annual disclosure ofrevenue loss due to some tax reliefs
subsidies

Medium: Estimated 1-2% of GDP in annual revenue
foregone due to tax expenditures.

4

2.1

Frequency of Inyear Fiscal
Reports

Advanced: Cash-based budget execution
reports are published on a monthly basis

Low: Monthly fiscal reports are published within 30
days

2.2

Timeliness ofAnnual Financial
Statements

Advanced: Annual financial statements are
published in a timely manner

Low: Annual reports are published within 5 monthsof the end of the financial year

3.1

Classification

Good: Fiscal reports include an
administrative, economic and functional,
classifications comparable withinternational standards

Medium: Inconsistent classifications of sometransactions lead to different levels of the fiscal
balances

3.2

Data
Consistency

Basic: Fiscal reports reconcile cash balance
and financing

High: Unexplained stock-flow adjustment of 4-5% of
GDP in recent years

3.3

Historical
Consistency

Basic: Material revisions to historical fiscal
statistics are reported

Medium: Historical statistics are not revised on
regular basis to reflect new information

4.1

Statistical
Integrity

Good: Statistics are prepared by semiautonomous government agency

Medium: Statistical integrity is supported by agovernment order.

4.2

External Audit

Good: Government accounts are auditedby an independent supreme audit
institution

Low: Accounts Chamber independence is protectedby the Constitution

4.3

Statisticaldissemination

Good: Fiscal statistics meet SDDS

Low: Reforms required to meet SDDS plus areunderway

4.4

Reliability

Good: The annual financial statements
meet national accounting standards andtheir reliability is validated

Low: No significant qualifications to recent accounts

31* See Glossary and Legend on page 4 for color coding** All figures refer to 2012 unless otherwise indicated

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RUSSIAN FEDERATION

II. FISCAL FORECASTING AND BUDGETING
2.0. Introduction
33.
This chapter assesses the quality of current fiscal forecasting and budgeting
practices relative to standards set by the July 2013 draft of the IMF’s Fiscal Transparency
Code. It focuses on four main areas:i.

the comprehensiveness of the budget and associated documentation;ii.

the timeliness of the budget and its passage;iii. the policy orientation of budget documentation; andiv. the credibility of the fiscal forecasts and budget proposals.
34.
The budget process in Russia is comprehensively regulated by the Budget Code of
the Russian Federation, which sets the rules and procedures for the preparation, approval,
and execution of federal, regional, and municipal budgets. This comprehensive legal
framework ensures consistent classification and treatment of expenditure and revenue, andenables strong central control over government finances. Budgets at all levels of government are
generally comprehensive, excluding only some extra-budgetary social funds which collect social
contributions but also receive transfers from the budget. The budgets of the Federal
government, sub-national governments and extra-budgetary funds are consolidated andpresented to Parliament in October of each year.
35.
A defining feature of budgeting and fiscal forecasting in Russia is their mediumterm orientation. Medium-term economic forecast prepared by the Ministry of Economic
Development are comprehensive, updated regularly, and (while not a legal requirement)
discussed with independent forecasting bodies. Budgets at all levels of government cover theupcoming year and a two-year forward planning period. Revenue, expenditure, financing, anddebt are presented for all three years at the same level of detail. A parliamentary decision on theouter years of the planning period is taken each year. The recently introduced fiscal rule—linking
aggregate federal expenditure to revenue calculated using a historically based oil-price—provides a bridge between aggregate fiscal planning and budget preparation. In recent years,
longer-term forecasts—covering the period up until 2030—have been prepared, and a morethorough fiscal sustainability analysis is being developed. A summary of the main macro-fiscal
forecasting and budget documents is presented in Table 2.1.

30

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

Table 2.1. Russia: Macroeconomic and Fiscal Forecasting and Budget Documents
Document
Long-term social andeconomic forecast of RF forthe period until 2030
Medium-term scenario
analysis of social andeconomic parameters

President’s budget address
Main directions of tax policy
for upcoming year and twoyear planning period
Main directions of budget
policy for upcoming year andtwo-year planning period
Medium-term forecast ofsocial and economic
parameters

Description

Timing

350 page document issued by the Ministry of Economic
Development discussing the external and domestic long-termMardevelopments, including a sectoral breakdown of the domestic(2013)

economy.
35 page document issued by the Ministry of Economic
Development presenting three to five scenarios for a selected
number of macroeconomic and social indicators over the

Apr-May

coming three years.
10 page document outlining the president’s medium-term
priorities for the upcoming budget.
50-60 page document presenting objectives and main
directions of tax policy.

June

June

100 page document presenting medium-term macroeconomic
assumptions, objectives of fiscal policy, projection of general
government finances, breakdown of budget expenditure, andJulysources of financing.
15 page document issued by the Ministry of Economic
Development presenting (Sept) and updating (Dec) the
medium-term forecast of macroeconomic and social

Sept, Dec

parameters underpinning the budget.
The government’s budget submission to parliament. In
addition to the proposed law and annexes (about 4,500 pages)
the budget submission includes a large volume of

Budget for upcoming year andaccompanying documents, including: update of the Main

two year planning period

directions of budget policy; updated macroeconomic forecast;Octassessment of budget outturn for current year; general
government forecast; objectives and performance indicators or
government programs and budgets for extra-budgetary funds.
Possible supplementarybudgets for current year

Same content as initial budget

June,
Sept, Dec

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RUSSIAN FEDERATION

2.1 Comprehensiveness of Budget Documentation
2.1.1. Budget unity (Good)36.
The Federal Budget covers all federally-funded ministries, agencies and otherentities defined as budgetary in national legislation. The annual budget law includes therevenue and expenditures of all 91 main spending units (ministries and agencies) of the Federal
government which receive their funding from the Federal Treasury. The budgets for the threefederal extra budgetary funds – Pension Fund, Social Insurance Fund, and the Federal Mandatory
Health Insurance Fund – are submitted together with the budget (Budget Code Article 192,
Paragraph 5), and approved by the legislature. The budget documentation also includes aconsolidated forecast of general government revenue and expenditure (Budget Code Article 192,
Paragraph 44).
37.
However, several public entities which carry out government functions are notpresented as part of the budget documentation. Of the six state corporations (Deposit
Insurance Agency, Vneshekonombank, Fund for Assisting in Housing and Utility Reform, Russian
Roads, Olympstroi, and Rosatom), only the first three are classified as part of central government
statistics and none are included in the annual budget. While these state corporations are legallydefined as non-profit companies, their activities involve the implementation of government
policies, for example managing road infrastructure PPPs (Russian Roads), overseeing theconstruction of public infrastructure (Olympstroi), managing the depositors guarantee scheme(Deposit Insurance Agency), supporting the diversification of the economy (Vneshekonombank),
or setting nuclear energy regulations (Rosatom). There are also announced plans for extrabudgetary investment or lending by two sovereign wealth funds, the National Wealth Fund andthe Investment Fund of the Russian Federation. Should these tax-funded institutions undertakesuch activity, they should be classified as government entities and presented in the annual
budget alongside other, budget-financed, public investments.

2.1.2. Gross budgeting (Basic)
38.
Most central government revenue and expenditure is authorized via the annual
budget. The annual budget law covers the vast majority of tax, non-tax, and non-refundable
revenue (Budget Code Article 41) collected by the federal government. However, revenue fromthe delivery of certain non-statutory and demand-driven goods and services—primarily in theareas of health and education—is not included in budget revenue. Instead, this revenue isallowed to off-set expenditure, with only the resulting net expenditure being drawn against
appropriations in the budget. Such own-financed expenditure accounts for 4.3 percent of total
central government expenditure in 2012, which is in line with other countries (Figure 2.1). Net
budgeting at the sub-national level is at around the same share of total sub-national
expenditure (3.7 percent in 2012). The retained revenues of predominantly fee-financed Federal
and sub-national agencies are not reflected in budget documentation, though actual feescollected and gross expenditure (both appropriation and fee-financed) are disclosed in theannual accounts.

32

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

Figure 2.1. Retained Revenue(Percent of Total Expenditure)
14

12
10
8

6
4
2

0
Australia

Japan

Austria

SwedenUK

RussiaNote: Revenue from fees and charges paid by non-government entities (i.e. does not include payments between government
entities), which is retained by the collecting agency. Reflects the fiscal year 2012, except Australia: 2011, Japan: 2009 and
UK: 2011.
Sources: Authorities' Data, Staff Estimates

39.
The specificity and transparency of the budget has been reduced in recent years
due to a growing share of expenditure being classified as secret for national security
reasons. This expenditure is shown only at an aggregate level and the detail provided for otherparts of the budget is withheld. The share of the budget classified as secret has risen over the
past five years and stood at close to 14 percent of total expenditure in 2013. It is forecast to
increase to close to 25 percent in 2016 as more agencies and activities (such as borderprotection) are classified as national security and spending on armaments increases (Figure 2.2).
Russia already has a relatively high proportion of budget expenditure classified as secret relative
to other G-20 countries, many of whom classify less than 1 percent of total budget expenditure
as secret (Table 2.2).

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RUSSIAN FEDERATION

Figure 2.2. Russia: Hidden (Unspecified) Expenditure in the Federal Budget(Percent of Total Expenditure)
25

20

15

10

5

0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Sources: Federal Budgets for 2006 - 2014-16

Table 2.2. Share of the National Budget Classified as Secret(Percent of Total Expenditure in 2012)
Below 1percent
Argentina
BrazilChina
FranceGermany
India
Indonesia
Italy
Korea
RussiaSaudi Arabia
South Africa
TurkeyUKUSA

1 to 3
percent

3 to 8percent

Over 8percent

X
X
X
X
X
X
X
X
X
X
X
X
X
X
X

Source: Open Budget Initiative
Note: Includes only secret items in the government's budget. The actual extent of undisclosed revenue and spending could behigher to the extent there is extra budgetary spending.

2.1.3. Macroeconomic forecasts (Advanced)
40.
The government produces regular, detailed, and credible medium-term
macroeconomic forecasts as part of the preparation and presentation of the annual
budget (Budget Code Article 192.4). The Ministry of Economic Development issues two or
three medium-term macroeconomic forecasts per year. The April forecast presents three to five34

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

macroeconomic scenarios as options for internal budget preparation purposes, but the
published document contains only a few key parameters. The forecast is updated in
September for use in the draft Budget presented to Parliament and again in December for use
in the final budget approved by Parliament. Both of these updates are published, including acomprehensive and detailed discussion on the underlying assumptions for inflation, growth andexchange rates. As shown in Figure 2.3, Russia has a strong macroeconomic forecasting record
despite the relative volatility in output growth (see Figure 3.1). Except for the crisis year of 2009,
forecasts for GDP-growth three-years ahead are unbiased and relatively accurate compared withother G-20 countries that publish multi-year forecasts.
Figure 2.3 Average Medium-Term Real GDP Forecasting Error 2000-12(Percent of GDP)
6
Average

4

Min

Max

2

0

-2

-4

-6
Australia

UK

Japan

South
AfricaGermany

BrazilTurkeyRussiaNote: Excludes 2009 for all countries, except Japan, which excludes both 2008 and 2009. For Brazil the data cover 2001-12. For
Turkey 2006-12. For Russia: 2005-12.
Sources: Authorities' data, staff estimates

2.1.4. Medium-term budget framework (Advanced)
41.
Russia has had a comprehensive and detailed medium-term budget framework
mandated by the Budget Code since 2008. Budgets at the Federal, sub-national, andmunicipal level cover the upcoming year and two-year forward planning years. Information on
forward plans is provided at the same level of detail for all years in the planning framework.
Expenditure is classified by organizational unit, function, economic category, and, where
specified, program. Revenue is classified by collecting entity and revenue type. Figures for thepreceding two years and the current year are presented at aggregate levels.
42.
Large revisions to outer years’ expenditure estimates in the medium-term budget
plan call into question the plan’s ability to discipline expenditure. Since 2008, actual

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RUSSIAN FEDERATION

expenditure has, on average, been 9 percent higher than the initial estimate for the second year
and more than 12 percent higher than the initial estimate for the third year. This level of forecast
error exceeds that of other countries with medium-term budgeting frameworks (Figure 2.4). The
introduction of a legally-mandated multi-year expenditure limit in 2013, as part of the new oil
price-based fiscal rule, may help to strengthen multi-year expenditure discipline.
Figure 2.4 Average Difference Medium-Term Estimates and Actual Expenditure(Percent of Total Expenditure)
20

15

10

5

0

-5

Austria

Sweden Germany

Japan

CanadaUK

USA

Australia

South
AfricaNew
Zealand

RussiaBrazil

t+3

t+2

t+1

t+3

t+2

t+1

t+3

t+2

t+1

t+3

t+2

t+1

t+3

t+2

t+1

t+3

t+2

t+1

t+3

t+2

t+1

t+3

t+2

t+1

t+3

t+2

t+1

t+3

t+2

t+1

t+3

t+2

t+1

t+3

t+2

t+1

t+3

t+2

t+1

-10
TurkeyNote: Covers the years 2000-12 except Austria: 2009-12; Japan 2002-2010; UK 2000-2011; Russia 2008-12; Brazil 2001-2011;
and Turkey: 2006-12.
Sources: National Budget Documents, Staff Estimates

2.2 Timeliness of Budget Submission and Approval
2.2.1. Fiscal strategy report (Good)43.
The government publishes four documents which outline its fiscal strategy aheadof the preparation of the upcoming budget. The President’s Budget Address (required by
Article 170 of the Budget Code), normally issued in June, outlines the key issues and the main
directions of budget policy for the upcoming year and the medium-term planning period, albeit
in qualitative terms. In July, the government issues a preliminary version of the Main Directions
for Budget Policy and the Main Directions for Tax Policy which contain fiscal projections for thegeneral government, federal budget, extra budgetary funds, and sub-national budgets, together
with an allocation of the federal budget to some 40 government programs for the upcoming
year and the medium term. In the Mid-Year Performance Report—normally issued in July—thegovernment reviews economic developments and fiscal performance mid-year, and prospects
for the remainder of the year. Taken together, the information presented in these documents
compares favorably with that provided by other countries’ pre-budget statements (Table 2.3),
though accessibility would be improved if they were combined into a single document.

36

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

Table 2.3. Timing and Contents of Pre-Budget Statements in Selected Countries

Country1.

Issuance

Parliamentary

Pre-Budget(months

decision on

Statement

beforesector/min.

fiscal year)

ceilings

MediumMedium

-term

-term

expend.

revenue

Austria

FederalFinancial
Framework Law

8

Yes

X

X

CanadaEconomic andFiscal Update

5

No

X

X

Estonia

State Budget
Strategy

7

No

X

X

Finland

Economic
Survey8

Submitted but
not adopted

X

FranceBudgetOrientation
Debate6

Submitted but
not adopted

Netherlands

SpringMemorandum

7

New
ZealandBudget Policy
Statement

RussiaGen. gov’t
or public
sectorcoverage
X

Macroecon
forecast

Debt
projections

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X1

X1

Submitted but
not adopted

X

X

X

X

X

4.5

No

X

X

X

X

President’s
BudgetAddress

6–9

No

RussiaMain Dir. For
Budget Policy

5–6

No

X

X

X

X

RussiaMain Dir. For
Tax Policy

5–6

No

South
AfricaMedium-term
Budget Policy
Statement

5

Yes

X

X

X

X

SwedenSpring Fiscal
Policy Bill

8

Submitted but
not adopted

X

X

X

X

X

UK

AutumnStatement

5

Submitted but
not adopted

X

X

X

X

X

X

X

For t+1 only.

Source: National documents

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RUSSIAN FEDERATION

2.2.2. Budget submission (Advanced)
44.
The annual budget is submitted to the legislature in a timely manner. According
to the Budget Code (Article 192, Paragraph 1), the government should send the draft budget,
including all the accompanying documentation, to the legislature (Duma) no later thanOctober 1, i.e., three months before the start of the budget year. As shown in Table 2.4, thetimelines of Russia’s budget submission compares favorably with other G-20 countries.

Table 2.4. Timing of Submission of the Budget Proposal to the Legislature, 2013
(number of months before the start of the budget year)

Argentina
Australia
BrazilCanadaChina
FranceGermany
India
Indonesia
Italy
Japan
Korea
MexicoRussiaSaudi Arabia
South Africa
TurkeyUK
USA

FourMonthsor MoreX

ThreeMonthsTwoMonthsOne
MonthAfter theStart ofthe Year

X
X
X

X

X
X
X
X
X
X
X
X
X
X
X
X
X

1

Canada submits a preliminary draft of its budget two months before the start of the budget year, and a detailed
draft budget after the start of the budget year.
Source: National Budget Documents.

2.2.3. Budget approval (Advanced)
45.
The budget is also approved well in advance of the start of the financial year towhich it refers. According to Article 196 of the Budget Code, the Duma should adopt thebudget in three readings within 60 days of its submission, i.e., by late November. Following
adoption by the Duma, the budget is sent to the upper house—Council of Federation—within
five days. The Council of Federation should adopt it within 14 days (Article 208, Paragraph1), andsend it to the President for signature within five days (Article 208, Paragraph 2). In the event that38

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

the budget is not adopted by the start of the financial year, monthly expenditure not exceeding
1/12 of the previous year’s budget can be executed (Article 190). For the past four years, thebudget has been adopted and published in the final days of November or the first days ofDecember, i.e. one month before the start of the financial year.

2.3 Legal Framework for Budgeting
2.3.1. Organic budget legislation (Advanced)
46.
A comprehensive legal framework covers all aspects of public financial
management at all levels of government. The Budget Code of the Russian Federation
N145-F3 from July 31, 1998 (with amendments up until July 23, 2013) governs fiscal policy
making, budget preparation and execution and accounting and audit. Fiscal policy making,including the fiscal rules for the federal budget and sub-national governments, is regulated by
Section IV. Budget preparation is regulated by Section VI, budget execution by Section VII, andaccounting, reporting and external control by Section VIII. In addition to the Budget Code andTax Code, there is separate legislation regulating government accounting and reporting andfinancial control, including a law on the Accounts Chambers (supreme audit institution).

2.3.2. Legal basis for revenue collection (Good)47.
The legal framework for tax collection is comprehensive but could be moreaccessible. The Tax Code N146-F3 from July 2008 (with amendments up until October 2013)provides a comprehensive legal framework for taxation in the Russian Federation. However,there is no official tax-payer’s guide to the tax system, other than those provided by nongovernment organizations or companies. However, the Ministry of Finance produces Main Tax
Policy Guidelines each spring summarizing the main tax policy and administration changes
anticipated over the coming three years. According to Article 100 of the Tax Code, a decisionby the Tax Authorities can be questioned within 15 days by the tax payer.

2.4 Policy Orientation
2.4.1. Fiscal policy objectives (Good)48.
A new oil price-based fiscal rule came into effect in 2013 which sets clear andmeasurable objectives for the fiscal performance of the Federal Government. According tothis rule, expenditure of the Federal Budget should not exceed the sum of three components:

projected non-petroleum revenue; pluspetroleum revenue calculated using a reference oil price; plusnet financing equivalent to 1 percent of GDP.

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RUSSIAN FEDERATION

Initially, the benchmark price for oil is set at the average oil price for the last five years. The
backward-looking time horizon for calculating the benchmark price will increase by one year
every year until a ten-year average is reached by 2018.
49.
The new fiscal rule is designed to promote stable and sustainable fiscal policy bybreaking the link between volatile oil revenues and expenditures. When the actual oil priceis above the benchmark oil price for the current year, the additional revenue is deposited in an
oil Reserve Fund. When the oil price is below the base price, the Reserve Fund can be used as afinancing source for the federal budget. The government has an objective to build up theReserve Fund’s assets to 7 percent of GDP. Once this size is achieved (currently projected by theauthorities to occur in 2019), the law requires 50 percent of any above-projection revenue to bedeposited in the National Wealth Fund—a savings fund intended to finance future pension costs.
The remaining 50 percent can be used for investments in domestic infrastructure or otherprojects of national importance. The rule also includes a mechanism for dealing with a sudden
drop in oil prices to ensure an accelerated adjustment of expenditure to adapt to the newsituation. However, to prevent sudden and discontinuous cuts in expenditure, ministerial
budgets cannot be reduced below the ceilings established in the previous three-year budget.

2.4.2. Performance information (Advanced)
50.
Following a series of reforms aimed at improving the performance orientation of
the budget, a comprehensive program budgeting framework is being introduced in thebudget for 2014-16, reorienting the existing performance budget model. Accordingly, some
40 expenditure programs have been approved covering the majority of federal budget
expenditure. Each program is assigned to a ministry as the lead agency, but other ministries canalso contribute to the program. For example, the Ministry of Sport is the implementing agency
for Program 13: “Developing Physical Culture and Sport” with the Ministries of Health,Communication, Education, Interior, and Regional Development also participating in the
program. Each program has a number of sub-programs; in the case of Program 13 there are
four: (i) “Developing Physical Culture and Sport for the Entire Population”; (ii) “Developing HighResults Sports”; (iii) “Organization of the FIFA Football World Championships in 2018 and theFIFA Confederations Cup in 2017”; and (iv) “Managing the Development of Areas of PhysicalCulture and Sports.”
51.
Programs are linked to specific sets of largely outcome-based performance
objectives. Each program has an Objective, which in the case of Program 13 is to: “Create
conditions for all citizens to engage in physical culture and sports, increase the international
competitiveness of Russian athletes, and successfully organize large international sporting eventsin the Russian Federation.” Under each program there are Tasks, Indicators, and outcome-based
Expected Results for the medium term. Examples of indicators for Program 13 include: (i) the
share of the population engaging in physical culture and sports on a regular basis; (ii) the shareof Russian Olympic athletes who receive medals; and (iii) the share of sports facilities in usedfollowing the organization of the FIFA World Championships in 2018 and the FIFA
Confederations Cup in 2017.
40

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

52.
The ministry responsible for a program is required to submit a report on theachievements of the program objectives each year. This report is sent to the Ministry of
Finance and to the Ministry of Economic Development, which consolidates the reports into asingle report on the performance of the government. While program documents are submitted
together with the budget proposal, performance reports are not formally approved by theDuma.

2.4.3. Citizens’ guide to the budget (Basic)
53.
The government has committed to the publication of a Citizen’s Budget startingin 2013. At the federal level, in mid-October 2013 the government published around 230 slides
containing information on the main fiscal policy directions, general government finances, key
figures for the federal budget, and detailed information on the composition of budget
expenditure. While this is a welcome development, its length and detail means it does notprovide an accessible and concise summary of the budget for citizens. The government also
recommends that regional and municipalities publish their own Citizen’s Budgets setting out:(i) general characteristics of revenue and expenditure; (ii) detail on the composition of revenue
and expenditure; (iii) intergovernmental fiscal relations; and (iv) any other information of interest
to local citizens.

2.4.4. Fiscal sustainability analysis (Not met)
54.
A long-term fiscal strategy for the Russian Federation is under preparation but has
not yet been published. The Ministry of Economic Development issues long-term projections
for the economy, the latest one in December 2012. While this document includes a section on
the development of main fiscal parameters, it is not based on a comprehensive assessment of
the cost drivers of key programs. To fill this gap, the Ministry of Finance is currently developing
a report on fiscal developments up to 2030. This document will have a more detailed assessmentof expenditure pressures beyond the budget cycle, including analysis of the sensitivity of publicfinances to various macroeconomic assumptions, which should provide valuable input into thediscussion of structural policies. However, a 15-year time frame is not long enough to capture
the implications for Russia’s fiscal sustainability of demographic change and the likely long-run
decline in oil and gas revenues. The risks that these long-run trends present for Russia’s fiscal
sustainability are discussed further in Sections 3.2.3 and 3.3.4.

2.5 Credibility of Forecasts and Budgets
2.5.1. Independent evaluation (Basic)
55.
While there is some independent scrutiny of macroeconomic and fiscal projections,a more formalized role for independent experts would help improve credibility andcontribute to the development of forecasting capacity. The Accounts Chambers is charged
with assessing the government’s Budget Proposal, and issues its opinion, including an evaluationof the government’s macroeconomic assumptions, in early October each year as an input into

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RUSSIAN FEDERATION

the parliamentary scrutiny of the budget. This evaluation covers the oil price, GDP, inflation andexchange rate, including comparisons with forecasts of commercial banks and international
finance institutes. In addition, the Ministry of Economic Development engages a number of thinktanks and research institutes such as the Economic Expert Group and the Academy of Scienceduring the preparation of macroeconomic forecasts.

2.5.2. Supplementary budget (Good)
56.
Changes in the legislated budget that increase the expenditure level orsubstantially alter its composition require amendments to the budget by parliament.
According to Articles 212 and 213 of the Budget Code, changes in the budget requireparliamentary and presidential approval following the same steps as the approval of the annual
budget. According to Article 217, if there are insufficient appropriations to fulfill social benefit
commitments, the government is allowed to increase the budget by 5 percent without
presenting a supplementary budget. Article 217 also allows for redistribution between
expenditure categories of up to 10 percent of expenditure during the execution of the budget,
giving the government a wide mandate to deal with unforeseen events.
57.
There have been relatively large supplementary budgets in the past, though recent
budgets have been more binding. There are typically two or three supplementary budgets per
year, which is in line with G-20 practice. However, the size of expenditure increases authorized byin-year budget amendments has been higher than in other G-20 countries (Figure 2.5). The
ability to increase overall spending without parliamentary approval and to overspend against theapproved budget have, at times, been used to substantially increase expenditure above theinitially approved budget (Figure 2.6). However, since 2009, supplementary budgets have been
considerably smaller and all in-year spending increases have been authorized by parliament.
Figure 2.5. Average Size of Supplementary Budgets 2000-12(Percent of Approved Expenditure)
8
7
6
5
4
3
2
1
0
South Africa

Germany

Australia

Korea

Japan

TurkeyNote: Excludes 2009. Korea: 2000-08; Japan: excludes 2008 and 2009, Turkey: 2004-10
Sources: Authorities' Data, Staff Estimates

42

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RussiaRUSSIAN FEDERATION

Figure 2.6. Russia: Expenditure Increases Following Budget Approval 2000-12(Percent of Approved Expenditure)
25
Other

Supplementary Budget

20

15

10

5

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Sources: Authorities' Data

2.5.3. Forecast reconciliation (Basic)
58.
Budget documentation provides relatively limited information about the sources ofoften substantial revisions to successive vintages of expenditure estimates in the mediumterm budget. The government updates its expenditure projections for the new budget andplanning period each year based on new policy commitments, updated macroeconomic anddemographic projections, and any changes in the budget structure that has occurred since theprevious year. While revisions to expenditure in the outer years have moderated lately, Figure 2.4
shows that, on average, second year (t+2) expenditure has been revised up by 9 percent andthird year (t+3) expenditure by 12 percent compared with the original budget. The Explanatory
Note to the budget contains some qualitative discussion of the impact of new policies, but lacks
a comprehensive reconciliation of the new medium-term expenditure estimates with those in theprevious year’s budget, decomposing any changes into macroeconomic factors, volumes andcase-loads, new discretionary policies and classification changes.

2.6. Conclusions
59.
In summary, fiscal forecasts and budgets meet either good or advanced practices inmost areas, but there are several areas where practices could be improved. Table 2.5
summarizes the quality of fiscal forecasting and budgeting relative to the standards set by the
July 2013 draft of the Fiscal Transparency Code as well as the relative importance of each area.
This assessment highlights a number of areas where fiscal forecasting and budgeting can be
improved. These include:

INTERNATIONAL MONETARY FUND

43

RUSSIAN FEDERATIONthe comprehensiveness and specificity of the annual budget is at risk from planned extrabudgetary expenditure and a growing proportion of expenditure classed as secret;

there is no unified fiscal strategy report setting the framework for budget preparation, no
published independent evaluation of the credibility of the government’s macro-fiscal
forecasts, and no detailed reconciliation of often substantial changes to medium-term
expenditure plans; and

long-term fiscal projections under preparation only have a 16-year forecast horizon and do
not explore the fiscal implications of alternative demographic or oil production scenarios.

Chapter IV includes a series of recommendations for how fiscal forecasting and budgeting canbe enhanced to provide a more comprehensive and credible picture of short, medium, and longterm fiscal prospects.

44

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

Table 2.5. Russia: Summary Assessment of Fiscal Forecasting and Budgeting*
PRINCIPLEASSESSMENT

IMPORTANCE**

REC

1.1

Unity

Good: Budget documentation is comprehensive but
leaves out some central government bodies.

Medium: Up to 0.7 % of GDP in extrabudgetarylending planned from NWF.

5

1.2

Gross
Budgeting

Basic: Revenue and expenditure are predominantly ona gross basis, except for some retained revenue fromfees and charges. A growing part of the budget is not
specified.

High: Share of budget classified as secret willgrow to 25 % in 2016.

5

1.3

Macroecon
Forecast

Advanced: The government publishes threecomprehensive macroeconomic forecasts per year,
including one included in the budget documentation.

Low: Medium-term forecast error for GDP is 0%

1.4

Medium-Term
BudgetAdvanced: Budget documentation includes mediumterm projections of revenues, expenditures, andfinancing by economic category, ministry, and program.

High: Three-year ahead forecast error for
expenditure was 13% over the past 4 years.

6

2.1

Fiscal Strategy
ReportGood: Main Directions of Budget Policy summarizes
key macroeconomic and fiscal parameters.

Medium: .Comprehensive fiscal strategy reportrequired to show compliance with fiscal rule6

2.2

BudgetSubmission

Advanced: Budget is submitted to the legislature 3
months before the start of the financial year.

Low: Allows for 2 months of budget debate

2.3

BudgetApproval

Advanced: The budget is approved about one month
before the start of the financial year

Low: Budget has been approved on time overthe past 10 years.

3.1

BudgetLegislation

Advanced: Comprehensive legal framework for fiscal
policy, budgeting, execution, accounting, and audit.

Low: Budget Code continually updated toaddress emerging issues.

3.2

Legal Basis for
Revenue

Good: Tax legislation is comprehensively covered in the
Tax Code. Tax Authority decisions can be appealed.

Low: Tax legislation is comprehensive andcompliance rates are high

4.1

Fiscal Policy
Objectives

Good: Medium-term fiscal rule is in place, but is onlybinding on planning and budget preparation.

Medium: Rule introduced in 2013, untested

4.2

Perform.
Information

Advanced: New comprehensive program budget
introduced in 2014.

Low: Program budget includes all key elements.

4.3

Citizens’
BudgetBasic: A first Citizen’s Budget was issued in Mid
October. The format and content will be refined further.

Medium: There are more than 4,000 pages inthe budget and more than 40 annexes.

4.4

FiscalSustainability

Not met: While fiscal projections up until 2030 are
being prepared, they have yet to be published.

High: Increase in pension expenditure up to
2050 close to 100 % of GDP on a NPV basis.

8

5.1

Independent
Evaluation

Basic: Some independent scrutiny of budgets andforecasts, but no formalized independent fiscal agency.

Medium: The new fiscal rule requires unbiased
forecasts.

65.2

Supplem.
BudgetGood: There are clear procedures for supplementarybudgets, but also wide mandates for the government
to overspend and alter the composition of the budget.

High: Supplementary budgets increased total
expenditure by more than 5% on averageduring 2008-12.

6

5.3

Forecast Recon

Basic: There is a qualitative discussion of differences
between the successive vintages of the government’s
forecasts.

High: Average revision of total expenditure in
medium-term plans are over 10%.

6

* See Glossary and Legend on page 4 for color coding** All figures refer to 2012 unless otherwise indicated

INTERNATIONAL MONETARY FUND

45

RUSSIAN FEDERATION

III. FISCAL RISK ANALYSIS AND MANAGEMENT
3.0. Introduction
60.
This chapter assesses the adequacy of fiscal risk analysis and management practices
relative to the July 2013 draft of the Fiscal Transparency Code in three areas:i.

general arrangements for disclosure and analysis of macroeconomic and specific fiscal risks;ii.

risks emanating from specific sources such as government assets and liabilities, guarantees,other financial exposures, long-term contracts, and financial derivatives; andiii. coordination of fiscal decision-making between central government, social security system,
local governments, and public corporations.
61.
While low general government debt and large oil and gas reserves provide room toaccommodate fiscal shocks, the fiscal risks it faces are large and diverse. GDP growth andgovernment revenues are relatively volatile, primarily due to the importance of the oil and gas
sector, making medium-term fiscal forecasting and policymaking challenging. Russia’s large
state-owned enterprises are also a significant source of potential fiscal risk, especially those withlarge balance sheets operating in volatile sectors such as finance and energy. Russia’s publicfinances also face longer-term fiscal pressures from its aging population and the likely long-term
decline in hydrocarbon revenues.
62.
The degree of disclosure and active management of these risks varies. The
government’s Budget Code and fiscal rules provide robust procedures for the management of
the risks from volatile oil and gas revenues, government guarantees, and sub-national
governments. However, there is no published strategy addressing specific risks arising fromstate-controlled enterprises or other contingent liabilities such as deposit insurance, or likely
long-term expenditure risks such as rising pension and healthcare costs or the costs of nuclear
decommissioning. More generally, as shown in Table 3.1, the reporting of fiscal risks is relatively
limited and diffuse and there is no consolidated statement of the key risks facing Russia’s publicfinances and the government’s strategy for managing them.

46

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

Table 3.1. Russia: Selected Reports Relating to Fiscal Risk

ReportFiscal Risks Addressed

AuthorMedium-term scenario analysis
of social and economic
parameters

Macroeconomic risks, including
alternative forecast scenarios

Ministry of Economic
Development

Long-term social and economic
forecast for the period until
2030

Debt management; government
guarantees; limited fiscal forecast
sensitivity
Long-term economic and social
developments to 2030, including
some fiscal projections to 2020

Financial stability report

Financial sector risks

Central Bank of Russia

Banking supervision report

Banking sector risks

Central Bank of Russia

Annual report

Deposit insurance

Deposit Insurance Agency

Financial Accounts

Assets and liabilities of general
government

RosstatAnnual reports

Finances of state-controlled jointstock companies and some state
corporations

VariousDebt of the Russian Federation

Debt of regional and municipal
government by region

Ministry of FinancePublic finance statistics

Revenues and expenditures ofregional and municipal government
by region

RosstatBudget execution reports

Use of contingency reserves

Federal Treasury

Flows to the Reserve Fund andNational Wealth FundOil and gas revenues

Federal Treasury

Statement on national oil andgas reserves

Volume of oil and gas reserves

Ministry of Natural Resources
and Environment

Public finance statistics

Social insurance, pension and healthinsurance funds

RosstatPublic Debt Management Report

Ministry of Finance
Ministry of Economic
Development

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47

RUSSIAN FEDERATION

3.1 Risk Disclosure and Analysis
3.1.1 Macroeconomic risks (Basic)
63.
The volatility of oil and gas prices and exports are a significant source of fiscal risk.
The energy sector accounts for around one-fifth of GDP, two-thirds of exports, and around onethird of general government revenues. Given the volatility of international energy prices, it is not
surprising that Russia’s nominal GDP growth (Figure 3.1a) and government revenue growth(Figure 3.1b) have been among the most volatile in the G-20 over the past decade. Table 3.2
illustrates the sensitivity of the Russian fiscal balance to changes in oil prices and the Russianrouble to US dollar exchange rate. For example, a permanent US$10 per barrel lower oil price ora 10 percent appreciation of the rouble are estimated to increase the deficit by around 1 percent
of GDP in 2015.8 The government recognizes these risks and has recently introduced a new fiscal
framework designed to mitigate their potentially pro-cyclical effect on fiscal policy, discussed
further in Chapter II.
Figure 3.1. Indicators of Macro-Fiscal Risk in the G-20, 2002-12
b. Standard Deviation of Government Revenue Growth

0.12

0.30

0.10

0.25

0.08

0.20

0.06

0.15

0.04

0.10

0.02

0.05

0.00

0.00

France
Korea
Japan
Italy
Australia
United States
South Africa
Germany
United Kingdom
CanadaBrazilIndia
MexicoChina
Indonesia
Argentina
RussiaTurkeySaudi Arabia

0.35

Germany
Australia
FranceItaly
CanadaKorea
Japan
United Kingdom
United States
India
BrazilSouth Africa
China
Argentina
MexicoTurkeyIndonesia
RussiaSaudi Arabia

a. Standard Deviation of Nominal GDP Growth
0.14

Source: IMF, World Economic Outlook database, October 2013

64.
However, the government only publishes a basic level of macroeconomic risk
analysis to support fiscal policymaking. The Ministry of Economic Development publishes,
alongside its central official forecast, an optimistic and pessimistic macroeconomic scenario
based on alternative assumptions for key variables such as the oil price, the exchange rate, andglobal economic developments. However, there is no analysis of the implications of these8

Based on the assumption that the exchange rate does not respond to changes in the global oil price. Table 3.2
illustrates the estimated impact of a US$10 fall in the oil price accompanied by a 5 percent depreciation. The
reduction in revenues is partially offset and the deficit is estimated to increase by around 0.8 percent of GDP.

48

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

alternative economic scenarios for the government finances. The Ministry of Finance’s Public
Debt Management Report includes a qualitative discussion and some illustrative quantification of
the impact of lower global oil prices on government revenues, balance and debt. However, it
does not provide a fully quantified set of alternative fiscal outcomes or forecasts.

Table 3.2. Sensitivity of Revenue, Expenditure and Balance, Share of GDP
2013

2014

2015

-0.7

-0.2

-0.6

10% appreciation in 2014

-1.2

-1.5

10% depreciation in 2014

0.3

-0.5

-1.3

-1.6

Federal balance
October WEO forecast
Exchange rate scenarios:

Oil and gas price scenarios:
Permanent $10 fall in 2014
Permanent $10 increase in 2014

1.0

0.3

Permanent US$10 fall and 5% depreciation

-0.9

-1.4

18.7

18.0

10% appreciation in 2014

17.7

17.1

10% depreciation in 2014

19.7

18.9

Permanent $10 fall in 2014

17.6

17.0

Permanent $10 increase in 2014

19.8

19.1

Permanent US$10 fall and 5% depreciation

18.1

17.4

18.9

18.6

10% appreciation in 2014

18.9

18.6

1

19.5

19.5

Permanent $10 fall in 2014

18.9

18.6

Permanent $10 increase in 2014

18.9

18.8

Permanent US$10 fall and 5% depreciation

18.9

18.8

Federal revenues
October WEO forecast

19.1

Exchange rate scenarios:

Oil and gas price scenarios:

Federal expenditures
October WEO forecast

19.7

Exchange rate scenarios:
10% depreciation in 2014
Oil and gas price scenarios:

Source: Staff calculations

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RUSSIAN FEDERATION

3.1.2 Specific fiscal risks (Not met)65.
In addition to macroeconomic volatility, the government is exposed to a wide arrayof fiscal risks arising from sources that are not easily incorporated into macroeconomic
analysis. These “specific” (or “discrete”) fiscal risks, a selection of which are shown in Table 3.3,
include:

non-macroeconomic factors that may cause revenue to be higher or lower than forecast. An
example is uncertainty around the take-up of tax exemptions by households and businesses
which, as set out in Chapter I, are worth up to 2 percent of GDP;risks related to assets and liabilities, including those not currently reported on a balance
sheet. Such risks include refinancing risks and the effect of changes in interest rates,
exchange rates and other variables on the values of the government’s asset and liability
holdings. In Russia the balance sheets of the large state-controlled corporations create asignificant additional layer of risks in this area;contingent liabilities, where the government may be exposed to future costs but the size andtiming is not certain. In some cases, the government’s exposure can be quantified, forexample, in Russia the government provides state guarantees worth 1.8 percent of GDP in2012 and guarantees the deposit insurance scheme which had total insured liabilities of
15 percent of GDP; and

long-term or open-ended risks, which are more difficult to quantify. In Russia these include
the costs of decommissioning nuclear facilities or of providing pensions and healthcare to an
aging population.

66.
The reporting of specific fiscal risks in Russia is currently limited and diffuse. The
Ministry of Finance reports on explicit state guarantees and these are included within the ceilings
set by the Budget Law for general government debt. However, there is no requirement on
ministries and agencies to report contingent liabilities in their accounts, or to provide analysis of
the risks around the public corporations which they control. Further, there is no official analysis
of long-term risks to the public finances from macroeconomic and demographic trends which
extend beyond the next 15 years.

50

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

Table 3.3. Russia: Selected Specific Fiscal Risks

Specific Risk

SourceBillion rubles

Percent ofGDP

18,000

30

9,400

15

1,130

1.8

1,300

2.1

940

1.5

880

1.4

38

0.06

6,100,000

98

2,400,00038

CURRENT FISCAL RISKS
Non-deposit liabilities of statecontrolled financial institutions
Deposit guarantee schemeState guarantees
Public private partnerships
Nuclear decommissioning costs
Contingent obligations tointernational organizations
Natural disasters (total averageannual cost of damages)

Annual financial statements;
Central Bank of Russia
2012 Annual report of the
Deposit Insurance Agency
2012 Public Debt
Management Report
Report of the Investment
Fund of Russia
Estimate based on reportingin UK and France
Estimate based on Australia
and New Zealand reporting
World Bank, World
Development Report 2014
LONGER-TERM FISCAL RISKSNet present value of projected
increase in state pension costs
Net present value of projected
increase in state health costs

IMF, Fiscal Monitor October
2013, estimate to 2050
IMF, Fiscal Monitor October
2013, estimate to 2050

Note: Estimates are based on data from 2012 unless stated otherwise.

3.1.3 Comparability of fiscal reports (Basic)
67.
Fiscal reports published by different national institutions are not fully comparable.
Rosstat compiles national accounts statistics for the general government sector following the
System of National Accounts methodology. In principle, the national accounts and the statisticalreports produced by the Federal Treasury using GFSM 2001 methodology should produce thesame fiscal balance. However, as set out in Chapter I, the results are not consistent, with recent
differences of up to 1.8 percent of GDP in recent years, due to different accounting bases,inconsistent sector coverage, and other unidentified reasons. The reliability of data is also
weakened by a lack of publicly available metadata explaining the sources and methods used for
producing statistics and reconciling different data.
68.
Inconsistencies between fiscal reports also arise due to the different accounting
treatment of accrued tax and loans. Tax revenue is recorded in accounts and statistics on thebasis of assessed obligations rather than accrued revenues, reducing the comparability ofbudgeted and actual levels of tax collection. In addition, budgets do not make ex ante provision
for likely non-payment of the estimated RUB 2.3 trillion (4.0 percent of GDP) in policy loans tocorporations and households.

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51

RUSSIAN FEDERATION

3.2 Risk Management
3.2.1 Allowance for budgetary contingencies (Advanced)
69.
Russia’s budget includes provision for contingencies with published access criteria
and quarterly reporting on utilization. The government’s general reserve fund can be set at no
more than 3 percent of total budget expenditure (Article 81 in Budget Code). Most of this isallocated to an Emergency Reserve Fund which is used to provide finance to meet the costs
associated with natural disasters at both the federal and regional level. A smaller amount is set
aside as a general reserve to finance various categories of unplanned government expenditures.
In addition, there is a President’s Reserve Fund which is limited to 1 percent of total budget
expenditure (Article 82 in Budget Code) and can be used for unplanned expenditures initiated by
the President.
70.
The criteria for accessing both these funds are set in regulation and utilization
requires the agreement of the Minister of Finance. Expenditures are reported in-year by the
Ministry of Finance to Parliament each quarter and are audited annually by the Accounts
Chamber. Despite these relatively sizable provisions for contingencies, Chapter II demonstrates
that there have been significant increases in expenditure above the initially approved budget ineach of the past ten years, with final federal expenditure exceeding that initially approved by
Parliament by more than 5 percent on average over the last twelve years.

3.2.2 Asset and liability management (Basic)
71.
The government produces an estimate of the general government balance sheet
which includes most conventional assets and liabilities. It reports liabilities of around
11 percent of GDP in 2012 and financial and nonfinancial assets of around 80 percent of GDP(Figure 3.2), though as discussed in Chapter I these assets are likely to be significantly
undervalued. However, the official balance sheet does not disclose long-term liabilities
associated with government-managed pension funds, growing liabilities under PPPs, any of theassets or liabilities of Russia’s large public corporations sector, or any sub-soil oil and gas
reserves (Table 3.4).

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INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

Figure 3.2. Russia: Assets and Liabilities of General Government(Percent of GDP)
Non-financial Assets

100

Financial Assets

Liabilities

80
60
40
20
0
-20
-40
2005

2006

2007

2008

2009

2010

2011

Source: Government Finance Statistics

Table 3.4. Russia: Selected Other Assets and Liabilities Not Reported, 2012
BillionrublesPercent
of GDP

Sub-soil assets (oil and gas reserves)

125,198

200

Public corporations

88,891

142

Public private partnerships

1,252

2

Public service pensions

1,878

3

Public corporations

88,891

142

Public private partnerships

1,252

2

176,529

282

AssetsContractual Liabilities

Other Liabilities
State pension rights accrued to 2012

Note: Estimate of PPP liabilities is based on limited information available on total projects funded by the Investment Fund of
Russia. The total stock of PPPs, including those funded by sub-national government, is likely to be larger than this. Pension
liability estimate uses IMF Fiscal Monitor methodology based on current pension policy. New pension policy proposals are
currently being considered by the Duma which if agreed may change the size of liabilities.
Source: Public Debt Management Report 2012; Financial statements; Staff calculations

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RUSSIAN FEDERATION

72.
Federal and sub-national borrowing is authorized by law and the Government’s
debt management strategy is set out in the Ministry of Finance’s Public Debt Management
Report (PDMR). The budget law for the year ahead and the two-year planning period thereafter
sets ceilings on domestic and foreign debts, as well as programs for domestic and foreign
borrowings. The PDMR, which is typically released annually, includes analysis of the federal
government’s domestic and external liabilities, as well as state guarantees and sub-national debt.
The PDMR includes some analysis of the risks around the government’s liabilities though this ismainly qualitative in nature. The MoF also releases monthly and quarterly data on foreign anddomestic debt and guarantees, and information on the debt of regional and municipal
governments aggregated by region.
73.
However, more limited information is published on the government’s financial
assets and there is no published analysis of the risks around these holdings. The acquisitionand disposal of government financial assets is controlled by the Budget Code and approved
through the annual budget process. However, there is limited information available on the stockof financial assets or the risks associated with them. The Federal Agency for State Property
Management is in the process of producing an online register of government-owned orcontrolled enterprises but this is not yet publically available. The Ministry of Finance publishes
information on the size and holdings of its wealth funds—the Reserve Fund and National Wealth
Fund—but again does not provide any risk analysis around its investment strategy.

3.2.3. Natural resources (Basic)
74.
Oil and gas production is an important source of revenue for the Russian
government, accounting for around one-third of general government revenues, but also
creates significant fiscal risks. Section 3.1 discusses how the volatility of energy prices affects
the medium-term fiscal projections. Reliance on a finite natural resource such as oil and gas also
raises longer-term sustainability risks. As oil and gas reserves are depleted, Russia will eventuallyneed to find alternative sources of revenue or reduce the level of public expenditure.
75.
The government currently publishes little information on the total value of its subsoil assets and long-term trends in hydrocarbon revenues. The Ministry of Finance regularly
publishes outturn data and a medium-term forecast of tax revenue from the oil and gas sector.
The Ministry of Natural Resources and Environment released estimates of the volume ofrecoverable reserves for the first time in 2013 and plans to do this on an annual basis. However,there is currently no official estimate of the fiscal value of these reserves. The Ministry of
Economic Development has produced projections of oil and gas revenue under alternative pricescenarios, but these only extend to 2020 at present.
76.
Staff calculations estimate the net present value of government revenues from subsoil oil and gas assets at around 200 percent of GDP. This estimate is based on the mid-point
between estimates produced using alternative measures of the volume of Russian oil and gas
reserves. Using the government’s July 2013 release of data on total explored, estimated andinferred Russian oil and gas reserves, the net present value is estimated at around 230 percent of

54

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

GDP. If only the portion of these reserves which are defined as proven are used then the netpresent value falls to around 170 percent of GDP.
77.
Illustrative fifty-year projections suggest that, under a range of price and output
scenarios, oil and gas revenues from these reserves are likely to fall steadily as a share ofGDP. As shown in Figure 3.3, oil and gas revenues are projected to fall from 9 percent of GDP toaround 2 percent of GDP over 50 years under a “constant real price” scenario where oil and gas
prices rise in line with overall Russian inflation and annual production remains constant over the
projection period. If prices are instead assumed to remain at current levels over the projection
period, then revenues fall to around 0.5 percent of GDP by 2063. In the “production growth”
scenario, where production is assumed to rise in the medium term, in line with government
projections, revenue is higher for the next 10 years before declining more sharply. While such
estimates are inherently very uncertain, this type of analysis is particularly important given the
demographic trends, discussed in Section 3.3.4 below, which are likely to create additional
demand for public sector expenditure on pensions and healthcare over the long-term.
Figure 3.3. Russia: Oil and Gas Revenue under Alternative Long-term Scenarios(Percent of GDP)
14

2013 Article IV
forecast
12

Projections
10

8

6

4

2

0
2011

2021

Constant real prices

2031

2041

2051

Constant current prices

2061

Production growth

Source: IMF Article IV Staff Report for Russian Federation, 2013. IMF staff estimates

3.2.4 Financial derivatives (Advanced)
78.
The government does not use financial derivatives directly. However, thegovernment controls several large banks and energy companies which typically make extensive
use of derivatives.

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RUSSIAN FEDERATION

3.2.5 Guarantees (Good)79.
The government reports on the annual flow and outstanding stock of government
guarantees in its Public Debt Management Report (PDMR). The 2012 PDMR projected thestock of outstanding guarantees to grow faster than government debt from RUB 472 billion(1.0 percent of GDP) in 2010 to RUB 2.7 trillion in 2013 (3.3 percent of GDP) (Figure 3.4a). The
PDMR also provides a sectoral breakdown of the composition of new guarantees. In 2012 thebulk of new guarantees were provided for foreign export and investment credits, defense
industry obligations, and domestic investment projects (Figure 3.4b). However, the PMDR only
includes a mainly qualitative discussion of the risks from these guarantees and the likelihood
they will be called.
Figure 3.4. Russia: State Guarantees
a. Stock of Government Guarantees and Debt
(Percent of GDP)b. Planned Issuance of Government Guarantees, 2012
(Percent of GDP)

18
16

Rosano obligations
3%
Defense industry
complexobligations
21%

14
12
10
8

Micro-financeorganizations
1%

6
4
2
0

2010

2011

2012

Stock of outstanding guarentees

2013

2014

2015

Agency for
housing mortgage
lending2%

General government debt

Investment
projects
30%

Insurance of
aviacarriers
3%

Agency forinsurance ofexport credit
facilities andinvesments
31%

Export guarantees
9%Source: Public Debt Management Report, 2012; IMF 2013 Article IV report

80.
There are controls in place on the maximum value of new guarantees that can beissued each year by federal and sub-national government. Under the Budget Code(Article 116) only the Minister of Finance can enter into guarantees on behalf of the governmentof the Russian Federation. The value of these guarantees is included in the government’s
estimate of public debt, the total value of which cannot exceed the maximum set by law.
However, these controls do not fully limit the fiscal risk to the government from guarantees.
There are types of guarantees which fall outside of these controls, such as financial guarantees
including the 15 percent of GDP in official deposit insurance discussed in Section 3.2.5, minimum
revenue guarantees under PPP contracts as discussed in Section 3.2.6, and guarantees provided
by public corporations which are not monitored or controlled by the federal government.

3.2.6 Financial sector exposure (Basic)
81.
The government has significant direct exposure to the financial sector through its
majority ownership of several of Russia’s largest banks. The Central Bank estimated thatstate-controlled banks accounted for 50.4 percent of total banking assets at the start of 2013, up
from around 35 percent in 2000. State-controlled banks accounted for 53.8 percent of loans to56

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

nonfinancial corporations in Russia. Figure 3.5 shows the unconsolidated liabilities of the fivelargest state-controlled banks (of which around one-third is household deposits) whichamounted to around 44 percent of GDP in total. Russian banks also have low capital-to-asset
ratios by comparison with other G-20 countries (Figure 3.6), suggesting they would be relatively
more vulnerable to macroeconomic or financial sector shocks.
Figure 3.5. Total Liabilities of Russian State-Controlled Banks(Percent of GDP, 2012)
25%

20%

15%

10%

5%

0%

Source: Annual financial statements; Staff calculations

Figure 3.6. Regulatory Capital Ratios in G-20 Countries, 2012/13
20
Regulatory Capital to Risk-Weighted Assets
18

Regulatory Tier 1 Capital to Risk-Weighted Assets

16

14
12
10
8
6

4
2
0

Source: IMF Financial Soundness Indicators, 2012/13

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RUSSIAN FEDERATION82.
The official deposit insurance scheme is financed by contributions from thefinancial sector but guaranteed by the government. It provides insurance for deposits ineligible banks up to RUB 700,000. At the end of 2012 the Deposit Insurance Agency estimatedthat its total insurance liability was RUB 9.4 trillion (15 percent of GDP), which represents acontingent liability for the government. The Deposit Insurance Agency provides detailed financial
information in its Annual Report, and sets out any funds that it receives from the federal budget.
83.
Government exposure to the financial sector is not assessed on a systematic basis.
The Central Bank produces a bi-annual Banking Supervision Reports and Financial Stability
Assessments which provide comprehensive assessments of banking and financial sector risks,
and information on the size and characteristics of the state-controlled sector. However, the risk
assessment in these reports focuses on assessing the financial sector as a whole and does not
isolate the risks facing state-controlled banks individually or as a group. The Central Bank
undertakes bank stress-tests and this year was given the power to mandate capital adequacy
increases in line with the Basel III framework. However, the government does not produce any
regular analysis of its total fiscal exposure to the financial sector and the risks around this.

3.2.7 Major and multi-annual contracts (Not met)
84.
The government does not provide a comprehensive report of its obligations underpublic-private-partnerships (PPP) and other major and multi-annual contracts. The Russian
government is actively promoting the use of PPPs in a number of sectors, including transport,
housing and utilities. While many projects are operated under regional PPP laws or within aframework provided by a 2005 federal law, a new federal PPP law is expected to be passed by theDuma by the end of this year. The government’s Investment Fund of Russia provides funding for
major federal PPP projects. By 2012 it had funded projects worth a total of RUB 1.3 trillion(2 percent of GDP). This total does not include many projects funded at sub-national level. The
number and value of projects is expected to grow rapidly in upcoming years, underscoring theneed to improve reporting and analysis of the government’s fiscal exposure.

3.2.8 Environmental risks (Basic)
85.
As discussed in Section 3.2.1, the government sets aside an Emergency Reserve of
up to 3 percent of the budget as a contingency for use to provide financial assistancefollowing natural disasters. The utilization of this fund is reported during the year but the
government does not provide a forward-looking analysis of the potential scale of the risks it
faces from environmental and natural disasters. Such analysis could be based on the average
cost to the government of past environmental and natural disasters. The average annual cost ofdamages from natural disasters between 1993 and 2012 was 0.06 percent of GDP in Russia,
which is relatively low compared to an average of 0.19 percent of GDP for the G-20 (Figure 3.7).
However, in the past two years, Russia has experienced very damaging floods in the south andeast of the country. The Emergency Reserve was used to provide assistance of around RUB 8 bn
(0.01 percent of GDP) following floods in the south of Russia. The government has recently

58

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

announced that it will provide RUB 12 bn (0.02 percent of GDP) for the floods currently affecting
the east of the country.
Figure 3.7. Average Annual Cost of Natural Disasters in G-20 Countries(Percent of GDP, 1993-2012)
0.9
0.8

0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0

Source: World Bank, World Development Report 2014

3.3 Fiscal Coordination
3.3.1 Sub-national governments (Advanced)
86.
At an aggregate level, sub-national government borrowing and debt does notappear to be a significant fiscal risk. The Ministry of Finance expects sub-national borrowing
to increase in the medium term, but overall debt levels are relatively low at around 2 percent of
GDP in 2012 (Figure 3.8). The Ministry of Finance reports that in 2012 intra-government lending
accounted for 37 percent of total sub-national debt. The fiscal autonomy of sub-national
government is limited as most revenue-raising powers are held at the federal level.
87.
The federal government places clear limits on the borrowing and debt of subnational government. Debt is limited to a ceiling equal to the sub-national government’s
annual budget revenue net of federal grants. Annual borrowing is limited to 15 percent ofrevenue net of federal grants for regions and 10 percent for municipalities (Article 91 in Budget
Code). In addition, debt servicing costs must not exceed 15 percent of expenditures net of
grants. Tougher restrictions are placed on regions and municipalities which rely more heavily on
federal grants. For example, if grants have exceeded 60 percent of a region’s own revenue in twoof the last three years, then the debt ceiling is reduced to 50 percent of revenues, annual

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RUSSIAN FEDERATION

borrowing is limited to 10 percent of revenue net of federal grants, and the region is required
to take action to raise local revenue and rationalize expenditures. Compliance with these limits
is monitored by the Ministry of Finance and any breaches can result in financial sanctions(Article 168 in Budget Code) and the imposition of reforms to internal financial management
practices which are evaluated on a rolling basis.
Figure 3.8. Sub-National Liabilities in Selected Countries(Percent of GDP, 2010-11)
60
50
40
30
20

10
0

Source: OECD; Staff calculations

Figure 3.9. Debt of Russian Regional and Municipal Governments(Percent of Regional GDP, 2011)
16
14
12
10
8
6
4
0

The Republic of Mordovia
Kostroma region
Kaliningrad region
The Republic of Tatarstan
Kaluga region
Astrakhan region
Republic of North Ossetia-…
The Chechen Republic
Saratov region
Vologda region
Altai Republic
Novgorod region
Chukotka Autonomous Okrug
Ryazan region
Kamchatka
The Republic of Mari El
Smolensk region
Penza region
Yaroslavl region
The Republic of Karelia
Karachay- Cherkessia
Tver region
Moscow region
The Republic of Kalmykia
The Republic of Buryatia
Magadan region
Chuvash Republic
Udmurt Republic
Samara region
Volgograd region
All other regions2

Source: World Bank, World Development Report 2014

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INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

88.
Data on the debt of regions and municipalities are published by the Ministry of
Finance on a monthly basis, aggregated by region (Figure 3.9). The Federal Treasury
publishes monthly information on budget execution including consolidated receipts andexpenditure by sub-national government. Individual regional and municipal governments are
required to publish financial information which follows national standards on at least an annual
basis. However, as discussed in the next section, limited information is provided on sub-national
ownership of public corporations and the risks around these holdings.

3.3.2. Public corporations (Basic)
89.
The government currently provides limited financial information or risk analysis on
the large and complex public corporation sector. The budget includes information on directtransfers between the government and public corporations, and the Federal Agency for State
Property Management is in the process of producing a public register of public corporations. The
government also publishes a three-year privatization strategy which provides financial
information on the enterprises being prepared for sale or divestiture. However, there is currently
no information or analysis of the overall size and composition of the public corporations sector,
its financial performance, levels of indirect government support, or the risks that these
corporations create for the government.
90.
There are over 30,000 public corporations, which fall into three broad categories
based on their legal form and financial reporting requirements:the government has holdings in over 8,000 joint-stock companies. Open joint stockcompanies are required to publish audited financial statements, which make it possible toestimate the contingent liability that they represent for the government. Figure 3.5 aboveshows that the total unconsolidated liabilities of the six largest state-controlled joint-stock
financial corporations are around 45 percent of GDP. The 18 largest state-controlled
nonfinancial joint-stock corporations have total liabilities of around 17 percent of GDP(Figure 3.10);



there are also over 22,000 unitary or Treasury enterprises which are special organizational
forms for commercial entities wholly owned by the government and receive transfers of state
property to be used in carrying out their functions. They are not explicitly required to publicly
disclose financial information. Such enterprises may receive subsidies from the budget whichin 2012 totaled RUB 27.8 bn or 0.2 percent of expenditure. These enterprises operate at alllevels of government including large federal network enterprises such as Russian Post andRussian Television and Radio Networks, and large regional and municipal transport
enterprises such as Moscow Metro, as well as more commercially-oriented enterprises inareas of construction and manufacturing. Many of these enterprises are closely linked to line
ministries and agencies and operate on the border of the government sector; and

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RUSSIAN FEDERATIONaround 300 government corporations have been established under specific pieces oflegislation under which the government transfers assets to these entities but is not
responsible for their financial obligations. They are legally defined as non-profit
organizations but their activities involve the implementation of government policies. Thesestate corporations, which include the Deposit Insurance Agency, Vneshekonombank, Russian
Roads, and Olympstroi are not required to publish financial statements though several havestarted to do so.
Figure 3.10. Liabilities of 18 Largest Public Nonfinancial Joint-Stock Companies, 2012
(Percent of GDP)
6
5
4
3
2
1
0

Source: Staff estimates based on annual reports of the 18 largest public nonfinancial joint-stock companies.

91.
The size of the public corporation sector and the lack of transparency around its
financial performance create significant fiscal risks for the government. Variations in public
corporations’ revenue and expenditure compared to budget plans can be a source of volatility infiscal outcomes. Changes in the value of public corporations’ assets and liabilities also create
fiscal risks given the explicit or implicit obligation for the government to provide financial
support for public enterprises that face financial difficulties. Figure 3.11 shows that subsidies topublic corporations and equity purchases in public and private corporations has grown as a shareof general government expenditure in recent years, in particular due to the latter.

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INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

Figure 3.11. Equity Purchases and Subsidies(Percent of General Government Expenditure)14
12Equity Purchase10

Subsidies

8
6

4
2
0

-2
-4
2004

2005

2006

2007

2008

2009

2010

2011

Source: IMF Government Finance Statistics

3.3.3 Quasi-fiscal activity (Not met)
92.
The government does not publish any information on the quasi-fiscal activity of
public corporations. This quasi-fiscal activity has typically taken three forms: (i) charging lower
than market prices for goods and services; (ii) the provision of non-commercial services thatwould otherwise be provided by the state; and (iii) the toleration of arrears by consumers or
firms. Such activities reduce the profits of public corporations and therefore the tax and/or
dividend they pay to the government and hide the true extent of government activity in theeconomy.
93.
The supply of energy to domestic consumers and former Soviet Union (FSU)
countries by Gazprom at below the long-run marginal cost price of production has been asignificant source of quasi-fiscal activity, however the size of this subsidy is likely to havefallen sharply in recent years as the government has increased regulated prices of oil, gas,and energy. The subsidy to FSU countries has been estimated to be worth US$75 billion
between 1992 and 2008. In 2011, the pre-tax domestic subsidies for gas and electricity were
estimated by the International Energy Agency at 0.99 percent of GDP and 1.09 percent of GDP,
respectively. Since then domestic gas prices have been increased by 15 percent in 2013, closing
the gap with marginal costs. However, Gazprom still receives a lower price from domestic
consumers and several FSU countries than for exports outside the FSU. The difference between
the value of domestically-sold gas valued at export parity prices and actual revenue fromdomestic sales has been estimated in 2012 at around RUB 1.7 trillion (2.5 percent of GDP).
94.
Some limited information on the provision of non-commercial services by public
corporations can be found in the financial statements of joint-stock companies. Common

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RUSSIAN FEDERATION

types of activities include construction and refurbishment of public sport and culture facilities aswell as sponsoring various public events. For example, a number of public corporations were
engaged in supporting the construction of facilities for the Sochi 2014 Winter Olympics Games.
In addition, public corporations are often involved in construction of local infrastructure. Whilethe nature of these activities is sometimes disclosed in their financial statements their costs isseldom quantified and disclosed. However, based on the limited information provided in thefinancial statements of the largest public joint-stock companies, the cost of this type of social
activity is estimated to be at least RUB 39 billion (0.1 percent of GDP) in 2012. As the numbers of
public corporations run into the thousands, the actual total is likely to be significantly higher than
this.

3.3.4 Health and social security (Basic)
95.
The government provides a basic level of information on its three federal extrabudgetary health and social security funds—the Pension Fund, the Social Insurance Fund,and the Federal Mandatory Health Insurance Fund. The current financial position of the funds
and forecasts for the subsequent three years are presented annually alongside the budget.
However, there are no longer-term projections or a published strategy to deal with possible
future spending pressures.
96.
The Pension Fund of Russia (PFR), which operates the pay-as-you-go pillar of thestate pension system, is the most significant of these funds with expenditure of around 9
percent of GDP. This operates alongside a funded pillar where currently a 6 percent payroll tax
is compulsorily invested in a funded pension operated by Vneshekonombank, unless individuals
chose to opt out and invest in a private sector fund. The government has recently announced aset of reforms that will move the funded pillar on to a voluntary basis. From 2015, unless
individuals explicitly chose to opt into a funded pension, their payroll tax contribution will instead
be paid into the PFR’s pay-as-you-go system. The government will also temporarily divert
contributions made to private sector funds from 2014 into the PFR, while these funds are audited
ahead of potentially giving them a government guarantee. By reducing the funded componentof state pensions these reforms may increase government expenditure on pensions in the longterm. Granting a government guarantee to the private pension funds will also increase thegovernment’s long-term contingent liabilities.
97.
Rising pension and healthcare costs are a significant long-term risk to thesustainability of Russia’s public finances. The IMF estimates that, on the basis of current
policy, the net present value of increased pension costs in Russia to 2050 is 97.6 percent of GDP,
which is one of the highest in the G-20 (Figure 3.12a). This represents the cost of the expected
increase in pension spending as a share of GDP from its current level, which is driven largely by
expected increases in life expectancy, relatively early retirement ages for women and men, andcontinued low fertility rates. The net present value of the increase in healthcare costs is estimatedat 37 percent of GDP, which is below the G-20 average, but still represents a significant risk to
the public finances (Figure 3.12b).

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INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

Figure 3.12. NPV of Change in Age-related Spending in G-20 Countries(Percent of GDP, 2013-2050)
a. Net Present Value of Change in Pension Spending

b. Net Present Value of Change in Health Spending
200

200
150

150

100
100

50
50

Italy
India
Japan
UK
FranceMexicoIndonesia
South Africa
Australia
CanadaGermany
US
Argentina
Saudi Arabia
BrazilChina
RussiaTurkey
Korea

-50

0

Indonesia
India
Italy
FranceGermany
Saudi Arabia
RussiaMexicoSouth Africa
Japan
China
Argentina
CanadaBrazilUK
Australia
TurkeyKorea
US0

Source: IMF Fiscal Monitor, October 2013

3.4 Conclusions
98.
In summary, while fiscal risk analysis and management practices generally meetbasic requirements, there is scope for improvement in a number of important areas.
Table 3.5 summarizes the quality of fiscal risk analysis and management practices relative to thestandards set by the July 2013 draft of the Fiscal Transparency Code as well as the relative
importance of each risk. This highlights a number of areas in which fiscal risk reporting andmanagement should be improved, including:the analysis of macroeconomic risks to the government’s fiscal forecasts, which would
improve understanding and allow for better risk planning;the consistency of fiscal reporting in budgets, statistics, and accounts;the disclosure and management of specific fiscal risks arising from the government’s assets
and liabilities, contingent liabilities, long-term contracts, financial sector exposures, and therisks from public corporations;the analysis of the risks from longer-term expenditure and revenue pressures, including
demographic trends and the long-term outlook for oil and gas revenues; andthe reporting of and oversight of state-controlled enterprises, where very limited financial
information is currently provided, including on the extent of their quasi-fiscal activity and therisks these enterprises may present for the government’s finances.

Chapter IV includes as series of recommendations for how disclosure and management of thesefiscal risks can be strengthened. These include general improvements to the coverage, quality
and consistency of fiscal reporting practices, as well as through publication of specific additional
analysis and documents aimed at enhancing the awareness and management of these risks.
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RUSSIAN FEDERATION

Table 3.5. Russia: Summary Assessment of Fiscal Risk Analysis and Management*
PRINCIPLEASSESSMENT

IMPORTANCE**

REC

1.1

Macroeconomic
Risks

Basic: Budget documentation includes discussion of thesensitivity of fiscal forecasts to major macroeconomic
assumptions.

High: US$10 change in oil price leads
to 1% change in balance.

7

1.2

Specific Fiscal Risks

Not Met: No disclosure of specific fiscal risks other thanguarantees.

High: Specific risks of at least 50% of
GDP are not reported.

7

1.3

Comparability of
Fiscal Data

Basic: At least one fiscal report is prepared on the same basis
as budgets.

Medium: Recent differences of up to
1.8% of GDP between estimates of thebalance.

3

2.1

Allowance for
Budgetary
Contingencies

Advanced: The budget includes a provision for contingencies
with transparent access criteria, and regular in-year reportingon utilization.

Medium: Final expenditure exceeded
initial plan by 5% of the budget on
average in past 12 years.

2.2

Asset and Liability
Management

Basic: Borrowing is authorized by law and the risks aroundthe government’s debt holdings are analyzed and disclosed.
Financial asset disposal and acquisitions are authorized bylaw.

High: Unreported public sector
liabilities of around 130% of GDP.

2.3

Natural Resources

Basic: An estimate of the volume of natural resource assets ispublished, as well as the value of the previous year’s sales andfiscal revenues.

High: Oil and gas revenues account for
one-third of total general government 2,7,8
revenue.

2.4 Financial Derivatives

Advanced: Government does not use financial derivatives.

Low: Government does not use
financial derivatives.

2.5

Guarantees

Good: Government guarantees, the sectors, and the gross
exposure created by them are published at least annually. The
maximum value of new guarantees is authorized by law.

Medium: Stock of guarantees
expected to reach 3.3% of GDP by
2015.

2.6

Financial Sector
Exposure

Basic: Explicit government support to the financial sector,
such as deposit insurance, is quantified and disclosed
annually.

High: State-controlled banks accountfor more than 50% of total financial
sector assets.

2,7,9

2.7

Major and MultiAnnual Contracts

Not met: No regular reporting of rights, obligations, andexposures under major and multi-annual contracts.

Medium: Total estimated value of PPP
contracts is 2% of GDP and likely to
grow.

7

2.8 Environmental Risks

Basic: The budget identifies and discussed the main fiscal
risks from natural disasters in qualitative terms.

Low: Average annual cost of natural
disasters is 0.06% of GDP.

7

2, 7

7

3.1

Sub-National
Governments

Advanced: The fiscal condition of sub-national governments
is published quarterly, and there is a limit on their liabilities
and borrowing.

Low: Sub-national debt is relatively
low at 2% of GDP.

3.2

Public Corporations

Basic: Direct transfers between the government and public
corporations are disclosed on an annual basis.

High: State-controlled corporations
have liabilities of at least 95% of GDP.

1,2,9

3.3

Quasi-fiscal activity

Not met: No disclosure of quasi-fiscal activity by public or
private corporations.

Medium: Some significant quasi-fiscal
activity remains

9

3.4

Health and Social
Security

Basic: The current financial position of social security andhealth funds and the projected position for the next three
years are disclosed annually.

High: Net present value of rise inpension and health expenditure by2050 is 135 % of GDP.

8

* See Glossary and Legend on page 4 for color coding**All figures refer to 2012 unless otherwise indicated66

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

IV. RECOMMENDATIONS
99.
The above findings suggest that reforms in nine areas would substantially enhance
the information base for fiscal decision-making and bring Russia’s fiscal transparency
practices into line with evolving international standards. They are to:
1. clarify the boundary between general government, public sector, and private sector andexpand the institutional coverage of fiscal reports to encompass the public sector;
2. expand the coverage of balance sheets to include subsoil assets and pension and publicprivate partnership liabilities;
3. enhance the consistency between budgets, statistics, and accounts in their treatment of noncash flows and valuation of fixed assets;
4. improve disclosure and management of the revenue foregone from tax expenditures;
5. improve the coverage and detail of the annual budget;
6. increase the transparency and scrutiny of macroeconomic and fiscal forecasts;
7. improve the disclosure and analysis of fiscal risks;
8. regularly publish long-term fiscal projections covering at least 30 years; and9. enhance the fiscal oversight of government-controlled enterprises.
The rationale for these recommendations and key steps involved in their implementation are set
out below. The specific actions required to implement these reforms over the next five years havebeen reflect in a Fiscal Transparency Action Plan developed in consultation with the Russianauthorities which has been appended to this report.

1. Clarify Institutional Boundaries and Expand Institutional Coverage100. Issue: The definition of general government used in fiscal statistics in Russia does notfollow international standards. There are also over 30,000 government-owned or controlled
enterprises (including state unitary enterprises, government corporations, and joint stockcompanies) with aggregate liabilities of at least 85 percent of GDP which are not captured in any
summary fiscal report.
101. Recommendation 1: Clarify the boundary between general government, public
sector, and private sector and expand the institutional coverage of fiscal reports by:a. adopting internationally accepted criteria for determining the classification of
institutional units to the general government, public corporations, and private sector.
This would help to establish a clear boundary between government, public, and private
sectors and ensure that economic substance prevails over legal form in the classification of
institutional units between the different sectors;

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RUSSIAN FEDERATIONb. consolidating those institutional units judged by Rosstat to be primarily non-market
into general government in statistics. This would provide a comprehensive overview of all
tax-funded activities of the government and ensure the international comparability ofRussia’s fiscal data; andc. preparing fiscal statistics for the aggregate public corporations sector and theconsolidated public sector. This would provide a regular and comprehensive overview ofscale and extent of government-directed financial activity in the economy.

2. Expand Balance Sheet Coverage102. Issue: Russia’s government balance sheet currently includes most conventional financial
assets of RUB 21.4 trillion (34.2 percent of GDP), liabilities of RUB 7.0 trillion (11.1 percent ofGDP) as well as nonfinancial assets of RUB 27.2 trillion (43.4 percent of GDP) for 2012. However,long-term liabilities of around 280 percent of GDP associated with government pension
obligations are not included in the government’s balance sheet. Also not included are small but
rapidly growing liabilities under PPPs. On the asset side, official balance sheets do not include thegovernment’s single most important category of assets, the estimated 200 percent of GDP in
future revenues from oil and gas reserves.
103.

Recommendation 2: Expand the coverage of balance sheets by:a. valuing and recognizing obligations from funded pensions schemes managed by thegovernment. This would provide a clearer picture of the impact of pension systems reforms
on the government’s overall net worth;b. valuing and disclosing off-balance sheet government pension liabilities from the payas you-go scheme. This would raise awareness of the growing obligations associated with
future unfunded social security benefits payments;
c. valuing and recognizing government liabilities under public-private partnershiparrangements. This would help to ensure that PPP arrangements are entered into because
they provide better value for money compared with conventional procurement, rather thanaccounting advantages; andd. valuing and recognizing subsoil assets, including future government revenue fromcommercially-exploitable oil and gas reserves. This will strengthen the assessment of theoverall net worth of the Russian public sector.

3. Enhance Consistency between Budgets, Statistics, and Accounts
104. Issue: Budget, statistics and financial accounts do not provide a consistent picture of
the key fiscal aggregates. Accrued tax revenue is recorded on the basis of assessed obligations
and does not reflect amounts that are unlikely to be collected. Consequently, accrued tax
revenue does not reflect future cash inflows and thus revenue is overestimated. In addition,
the government does not make ex ante provision in budgets for likely non-payment on its
RUB 2.3 trillion (4.0 percent of GDP) stock of policy loans to corporations and households. As aresult, government expenditure is underestimated as they do not include the unrecoverable
68

INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

funds originally granted as a loan. By contrast, government budgets provision for nearly the fullamount of its RUB 115 billion (0.2 percent of GDP) in guarantees issued each year which tends tooverstate forecast liabilities as only 5 percent of the total value guarantees have been called overthe past 2 years. Finally, fixed assets are recorded in accounts at book value but valued in the
SNA 2003 based national accounts statistics using a proxy for market prices, leading to an atleast ten-fold difference in valuations.
105. Recommendation 3: Enhance the consistency between budgets, statistics, andaccounts by:a. including in budgets and accounts provisions for taxes unlikely to be collected andreflecting them in statistics. This would ensure comparability between budgeted and actuallevels of tax collection;b. including in budgets and balance sheets provision for non-repayment of loans. This
would reduce incentives for policy lending as a means of transferring value to nongovernment entities;
c. making budgetary provisions only for guarantees that are more than 50 percent likely
to be called and charging a market-related guarantee fee. This would ensure thatbudgets make appropriate allowance for the riskier guarantees, reduce the implicit subsidy tothe beneficiaries, and generate a revenue stream to pay for guarantees that are ultimately
called; andd. moving toward greater market valuation of nonfinancial assets in accounts. This would
ensure that accounts reflect the true value of government fixed assets and highlight thosewith the highest recoverable value.

4. Improve Disclosure and Management of Tax Expenditures
106. Issue: The government foregoes a significant amount of revenue through various tax
allowances, rebates, credits, and concessions. Depending upon the estimation methodology
employed, the total revenue loss from tax expenditures is estimated at between 1.2 percent and2.1 percent of GDP.
107.

Recommendation 4: Improve reporting and management of tax expenditures by:a. estimating the revenue loss from tax expenditures. This would help to illustrate theoverall cost of this hidden subsidy to corporations and households;
b. presenting the revenue loss from tax expenditures alongside associated expenditure inbudget documentation. This would serve to illustrate the full extent of government support
to a given policy objective and encourage debate about the most efficient means ofdelivering such support; andc. improving the scrutiny and management of tax expenditures. This could include
periodically reviewing tax expenditures alongside associated spending program with the aim

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RUSSIAN FEDERATION

of progressively reducing tax expenditures with high deadweight costs or translating theminto more transparent and better-targeted expenditure programs where possible.

5. Improve the Coverage and Detail of the Annual Budget
108. Issue: While the annual budget provides a relatively comprehensive overview ofgovernment revenues and expenditures, a growing proportion of budgeted expenditure isclassified as secret and therefore presented at only a highly aggregated level. In addition, there is
growing pressure for extra-budgetary expenditure via such vehicles as the National Wealth Fund
(NWF) and Russia Direct Investment Fund (RDIF).
109.

Recommendation 5: Improve the transparency of the annual budget by:a. reviewing the proportion of the budget classified as secret to ensure that it covers only
those expenditures associated with national security. This would ensure the transparency
and international comparability of Russia’s expenditure figures; andb. presenting any infrastructure investments from the NWF and RDIF alongside theannual budget. This would ensure that all investments paid for out of public funds arepresented to and approved by the legislature.

6. Increase the Transparency and Scrutiny of Official Forecasts
110. Issue: While Russia’s official macroeconomic forecasts have been relatively accurate andunbiased, fiscal forecasts over the last five years have tended to underestimate the future
expenditure level by 13 percent over the three-year forecast horizon. The establishment of an oil
price-based fiscal rule puts a premium on improving credible revenue and expenditure forecasts.
While the government widely consults outside experts on its official macroeconomic forecasts,
their advice is not published and there is no obligation on the government to respond to it. Also,
while the government publishes a range of official macroeconomic and fiscal planningdocuments in the late spring, early summer, there is no single comprehensive strategy document
presented to Parliament setting the macroeconomic and fiscal framework for the preparation up
the upcoming budget.
111. Recommendation 6: Increase the transparency and scrutiny of official
macroeconomic and fiscal forecasts by:a. publishing a comprehensive Fiscal Strategy Report in late spring/early summer settingout macroeconomic and fiscal developments to date, the official macroeconomic andfiscal forecast for the medium-term, and the framework for preparation of theupcoming budget. This would provide a focal point for scrutiny of the government’s
macroeconomic and fiscal forecasts and policies before they are used to prepare the annual
budget;b. publishing in this document and the annual budget a comprehensive reconciliation of
the changes to the government’s fiscal forecast separately identifying the effects ofchanges in (i) macroeconomic variables; (ii) sector-specific parameters; (iii) policy

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INTERNATIONAL MONETARY FUNDRUSSIAN FEDERATION

measures; (iv) classification changes; and (v) other factors. This would provide greatertransparency about the fiscal and economic impact of discretionary policy decisions andimprove understanding of the drivers of fiscal forecast errors; andc. formalizing independent evaluation of the official macroeconomic and fiscal forecasts
by seeking published input from independent experts to which the government must
respond when it presents the annual budget. This would help to safeguard the credibilityof macro-economic and fiscal forecasts and improve the quality of macroeconomic and fiscal
debate in the run-up to the presentation of the annual budget.

7. Improve Disclosure and Analysis of Fiscal Risks
112. Issue: Fiscal prospects are highly sensitive to alternative macroeconomic assumptions.
For example, a US$10 per barrel fall in the price of oil would lead to an increase in thegovernment deficit of approximately 1 percent of GDP. While the government publishes threealternative macroeconomic forecasts as part of the formulation of the annual budget, the fiscal
implications of these scenarios are not presented. The government also faces large contingent
liabilities and other fiscal risks including state guarantees which are forecast to rise to
RUB 2.7 trillion (3.3 percent of GDP), non-deposit liabilities of government-controlled financial
institutions of RUB 18 trillion (30 percent of GDP), exposure to the deposit insurance scheme ofRUB 94 trillion (15 percent of GDP), and long-term nuclear decommissioning costs estimatedRUB 940 billion (1.5 percent of GDP). While some of these risks are discussed in various official
publications, there is no comprehensive summary of the specific fiscal risks facing thegovernment and its strategy for managing them.
113.

Recommendation 7: Improve fiscal risk analysis and disclosure by:a. including in budget documentation (i) analysis of the sensitivity of the government’s
fiscal forecast to different macroeconomic assumptions, (ii) alternative macro-fiscal
scenarios, and, ultimately, (iii) probabilistic analysis of the range of potential forecast
outcomes. This would help to illustrate the robustness of the fiscal setting to a range ofplausible macroeconomic shocks and underscore the importance of contingency planning infiscal policymaking; andb. publishing a comprehensive statement of fiscal risks setting out the government’s
largest contingent liabilities, estimates of their magnitude and likelihood, and thegovernment’s strategy for managing them. Doing so would raise awareness of the scaleand sources of discrete risks to the public finances and improve incentives for risk mitigation,
provision, and management.

8. Publish Long-term Fiscal Projections
114. Issue: The government has published long-term economic projections covering theperiod 2014-2030 and plans to publish a Long-term Fiscal Strategy covering the same period in
2014. However, the 16 year time horizon is too short to demonstrate the intergenerational

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RUSSIAN FEDERATION

fairness or long-term sustainability of the government’s fiscal policy settings. Furthermore, theLong-term Fiscal Strategy will not include alterative demographic and policy scenarios which
would allow it to explore long-term fiscal pressures such as the 100 percent of GDP in additional
pension costs and 37 percent of GDP in additional healthcare costs expected (on a net present
value basis) over the period to 2050.
115. Recommendation 8: Publish long-term fiscal projections for the next 30-50 years
using a range of macroeconomic, oil market, and demographic assumptions. This would
illustrate the long-term sustainability and intergeneration fairness of the government’s current
policies. By using a range of assumptions regarding output growth, oil output and prices, andfertility, employment, retirement, and mortality rates, the projections would also illustrate thesensitivity of the government’s fiscal prospects to alternative futures and highlight policies thatcan materially improve long-term sustainability.

9. Enhance the Financial Oversight of Public Enterprises
116. Issue: Russia has over 30,000 public corporations with gross liabilities of at least
RUB 53 trillion (85 percent of GDP). While all of these corporations prepare financial statements,
less than 2,000 are required to publish them. There is no aggregate reporting on the financial
position and performance of the sector. While quasi-fiscal subsidies associated with the sale ofenergy at below market prices by Gazprom and Rosneft have been substantially reduced inrecent years, Russia’s largest public corporations continue to engage in quasi-fiscal activity which
is not always transparently presented in their accounts.
117.

Recommendation 9: Facilitate the financial oversight of public enterprises by:a. requiring all the public corporation to publish financial statements and have themaudited. This would improve the transparency, accountability, and governance of theseenterprises;b. requiring all public corporations to present their financial statements in a format whichfacilitates consolidation of the public sector. This will clarify their financial relationshipwith government and allow for the preparation of whole of government accounts and public
sector fiscal statistics;
c. requiring public corporations to disclose and quantify in their financial statements thecost of any provision of goods or services at below market prices, public service
undertakings, or other quasi-fiscal activity. This would improve understanding of the full
extent and cost of fiscal activity in the economy; andd. publishing an annual report on the fiscal performance, prospects, and risks of the
public corporations sector. This would improve the surveillance of the sector and informthe development and implementation of the strategy.

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Appendix I. Russia: Fiscal Transparency Action Plan
Action

2014

2015

2017

2018

2019

Apply control
test to identify
all public
corporations

Consolidate all
additional nonmarket Federal
units into
generalgovernment
accounts andstatistics

Apply market
test to all subnational
corporations to
identify
additional
generalgovernment
units

Consolidate all
additional nonmarket sub-national
corporations into
general government
accounts andstatistics

Publishaggregate
statistics for
publiccorporations
sectorPublish statistics
for theconsolidatedFederalgovernment andits 100 largest
corporations

Public statistics
for theconsolidatedFederalgovernment andall its
corporation

Publish statistics forthe consolidated
public sector
including bothFederal and subnational public
corporations

1. Clarify Institutional Boundaries and Expand Institutional Coveragea. Adopt internationallyaccepted criteria forclassifying entities to
the general
government andpublic sectorb. Consolidate entities
judged by Rosstat tobe primarily nonmarket into general
government statistics
INTERNATIONAL MONETARY FUND

c. Prepare fiscal statistics
for the public
corporations sector
and consolidated
public sector

Adopt
GFSM2013
criteria forclassification ofunits to thegeneralgovernment

Adopt
GFSM2013
criteria forclassification ofunits to the
publiccorporations
sectorApply market
test to all Federal
corporations to
identify
additional
generalgovernment
entities

EVALUATIONFEDERATIONRUSSIA: FISCAL TRANSPARENCY EVALUATIONRUSSIA: FISCAL TRANSPARENCYRUSSIAN

2016

73

74

2014

2015

2016

2017

2018

2019

Value assets andaccrued liabilities
from fundedpensions

Disclose assets
and liabilities
from fundedpensions innotes to balance
sheet

Recognize assets
and liabilities
from fundedpensions inbalance sheets

Value liabilities
from public
PAYGO pensions

Discloseliabilities frompublic PAYGO
pensions innotes to balance
sheet

Recognize
liabilities frompublic PAYGO
pensions inbalance sheetc. Valuing andrecognizing
government liabilities
under PPPs

Publishaggregate valueof PPP contracts

Publishaggregate value
and flow ofgovernment
payments under
PPP contracts

Estimate andpublish NPV ofgovernment
payments andother obligations
under PPP
contracts

Recognize
government
obligations
under PPPs incentralgovernment
balance sheet

Recognize
government
obligations under
PPPs in general
government balancesheet

d. Valuing andrecognizing subsoil
assetsPublish survey ofvolume of oil
and gas reserves

Publishestimated valueof oil and gas
reserves

Recognize valueof oil and gas
assets in balance
sheet

Publish survey ofother sub-soil
assetsRecognize value ofother sub-soil assets
in balance sheet

2. Expand Balance Sheet Coverage
a. Valuing andrecognizing accrued
liabilities from fundedpublic pension
schemesb. Valuing anddisclosing
government liabilities
from public PAYGO
pensions

RUSSIAN FEDERATIONINTERNATIONAL MONETARY FUND

ActionAction

2014

2015

2016

2017

2018

2019

3. Enhance Consistency Between Budgets, Statistics, and Accounts

Estimate value oftaxes unlikely to
be collected

Disclosure valueof taxes unlikely
to be collected innotes to theaccounts

Includeprovisions fortaxes unlikely to
be collected inaccounts

b. Include provisions for
nonrepayment ofloans in budgets andaccounts

Estimate value ofloans unlikely tobe recovered

Disclosure valueof loans unlikely
to be recovered
in notes to theaccounts

Includeprovisions forloans unlikely tobe recovered inaccounts

c. Provision forguarantees likely to
be called and chargemarket-based
guarantee fee

Charge marketbased fee forgovernment
guarantees

Estimatelikelihood ofdifferent classesof guarantees
being called

Disclosure valueof guarantees
likely to becalled in budgets
and accounts

Provision inbudgets andaccounts forguarantees likely
to be called

Apply market
valuation to
expanded asset
range in statistics

Apply market
valuation to
expanded rangeof assets inaccounts forcentralgovernment

Apply market
valuation to
expanded rangeof assets inaccounts forregional
government

Apply market
valuation to
expanded rangeof assets inaccounts formunicipal
governmentd. Move to more market
valuation of nonfinancial assets

Updatecategories ofassets for whichmarketvaluations are
required75

RUSSIAN FEDERATIONINTERNATIONAL MONETARY FUND

a. Include provisions fortaxes unlikely to becollected in budgets
and accounts

76

2014

2015

2016

2017

2018

Present revenue
loss from tax
expenditures
alongside
associatedexpenditures inbudgetdocumentation

Review tax
expenditure
alongside
associatedspending to
identify areas ofhigh deadweight
cost

Progressively
reduce tax
expenditureswith highdeadweightcosts or translatethem into
expenditure
programs

Periodicallyreview secret
expenditurecategories

4. Improve Disclosure and Management of Tax Expenditures

Improve the reportingand management of tax
expenditures

Estimate therevenue loss
from tax
expenditures

Publish report onrevenue loss
from tax
expenditures by
tax and type ofrelief

5. Improve the Coverage and Detail of the Annual Budget

a. Review the proportionof the budget classified
as secretEstablish a panel
comprising
government,
Duma, andAccounts
Chamber
representatives
to review secret
expenditurecategories

Review theexpenditure
items classed as
secret in thebudgetDeclassify the
expenditure ofnon-securityrelated
expendituresb. Present any
infrastructure
investments from the
NWF and RDIF alongside
the budget

Present any
directinfrastructurefrom NWF andRDIF alongside
the budget

Clarify in NWF
and RDIF
procedures forapproval of
directinfrastructure
investments

Channel future
NWF and RDIF
investments
through thebudget2019

RUSSIAN FEDERATIONINTERNATIONAL MONETARY FUND

ActionAction

2014

2015

2016

2017

2018

2019

6. Increase Transparency and Scrutiny of Official Forecasts
Introduce springbudgetorientation in
Parliament basedon Fiscal
Strategy for
preparation of2016 Budget

Use Fiscal
Strategy to set
overall
expenditureceiling for
preparation of2017 Budget

Use Fiscal
Strategy to set
overall andprogram ceilings
for preparationof 2018 budget

b. Provide a morecomprehensive
reconciliation ofchanges to key fiscal
aggregates between
successive fiscal
forecasts

Publish areconciliation of
forecast changes
separately
identifying (i)macroeconomicand (ii) otherfactors

Publish areconciliation of
forecast changes
separately
identifying (i)macroeconomic(ii) policy, and(iii) otherchangesPublish areconciliation of
forecast changes
separately
identifying (i)macroeconomic(ii) policy, (iii)classification,and (iv) otherchangesPublish areconciliation of
forecast changes
separately
identifying (i)macroeconomic(ii) policy, (iii)classification,and (iv) otherchangesc. Seek published input
from independent
experts on the official
macro and fiscal
forecasts

Identify
independent
experts panel toreview
macroeconomic
and fiscal
forecast

Publish expert’
panel’sassessment ofofficial
macroeconomic
forecast

Publish expert
panel’sassessment ofofficial
macroeconomic
and fiscal
forecasts

INTERNATIONAL MONETARY FUND

Expand expert
panel’s remit toincludeassessment ofgovernment
compliance withfiscal rule

Publish areconciliation of
forecast changes
separately
identifying (i)macroeconomic(ii) policy, (iii)classification; (iv)sector-specificparameter, and(v) other changes
Expand panel’s
remit to include
review of fiscal
risk statement
and long-term
projections

77

RUSSIAN FEDERATION

Publish Fiscal
Strategy
integrating
macro forecasts,
fiscal projections,and President’s
priorities

a. Publish acomprehensive Fiscal
Strategy each spring
to provide aframework for budget
preparation

78

2014

2015

2016

a. Improve analysis anddisclosure ofmacroeconomic risks

Publish analysisof sensitivity offiscal forecasts todifferent
macroeconomic
assumptions

Publishalternative fiscal
scenarios basedon alternative
macroeconomic
scenarios

Publishprobabilistic
analysis of rangeof forecast fiscal
outcomes basedon past forecast
errorsb. Publish acomprehensive fiscal
risk statement

Preparequalitative fiscal
risk statement
for internalmanagement
purposes

Preparequantified fiscal
risk statementwith value of
exposures toquantifiable risks

Publish fiscal riskstatement withvalue ofexposure toquantifiable risks

Publish 30-50
year fiscal
projections
based on a
range ofmacroeconomic
and oil market
assumptions

Publish 30-50
year fiscal
projections
based on a
range ofmacroeconomic,
oil market, anddemographic
and policy
assumptions

2017

2018

Publish fiscal riskstatement withvalue ofexposure andlikelihood ofquantifiable risks

Publish fiscal riskstatement withvalue ofexposure to,likelihood of,and strategy for
managing
quantifiable risks

7. Improve Disclosure and Analysis of Fiscal Risks

8. Publish Long-term Fiscal Projections

Publish long-term
fiscal projections forthe next 30-50 years
based on a range ofunderlying
assumptions

Publish fiscal
projections to2030 based on a
range ofmacroeconomic
and oil market
assumptions

2019

RUSSIAN FEDERATIONINTERNATIONAL MONETARY FUND

ActionAction

2014

2015

2016

2017

2018

Require all public
corporations
with liabilities
above athreshold topublish financial
statements

Require all public
corporations topublish financial
statements andaudit those withliabilities above athreshold

Require all public
corporations topublish financial
statements andhave themauditedb. Require all public
corporations topresent their financial
statements in aformat whichfacilitates public
sector consolidation

Require 100
largest public
corporations to
identify alltransactions andcross-holding
with government

Require 100
largest public
corporations to
identify alltransactions andcross-holding
with governmentand other public
corporations

Require all public
corporations to
identify alltransactions andcross-holding
with governmentc. Require public
corporations todisclose and quantify
all quasi-fiscal activity

Require joint
stock companies
to quantify all
public service
undertakings,
and provision of
goods/services
at below-market
prices in financial
statements

Require all public
corporations todisclose all quasi
fiscal activity infinancialstatements

Require all public
corporations todisclose andquantify all quasi
fiscal activity infinancialstatements

2019

9. Enhance the Financial Oversight of Public Enterprises

a. Require all public
corporations topublish audited
financial statement

Require all public
corporations
with liabilities
above athreshold topublish financial
statements

79

RUSSIAN FEDERATIONINTERNATIONAL MONETARY FUND

Require joint
stock companies
to quantify all
public service
undertakings infinancialstatements

Require all public
corporations to
identify alltransactions andcross-holding withgovernment andother public
corporations

INTERNATIONAL MONETARY FUND

2014

2015

2016

2017

2018

d. Publish annual reporton the public
corporations sector

Publish survey ofnumbers andactivities ofpubliccorporations by
economic sector

Publish overview
of aggregate
financial positionof public
corporations
sectorPublish overview
of aggregate
financial positionand prospects ofpubliccorporations
sectorPublish overview
of aggregate
financial
position,prospects, andrisks of public
corporations
sectorPublish overview
of consolidated
financial
position,prospects, andrisks of public
corporations
sector2019

RUSSIA: FISCAL TRANSPARENCY EVALUATIONRUSSIAN FEDERATION

80

ActionRUSSIA: FISCAL TRANSPARENCY EVALUATION