design of the agreements between Belarus and the Russian Federation concerning crude oil and oil products trade. Currently, Belarus gets all export duties on oil products produced by Belarusian refineries from Russian oil (which was not the case between 2007 and 2014), but Russia may cut the oil supply to Belarus, reducing its exports and related budget revenues.

# _Government expenditures_

A quick look at the structure of general government expenditures supports the “social orientation” of the fiscal policy: social spending amounts to 64.9% of the general government expenditures (see Table 2). The biggest portion (10.4% of GDP) is spent on old age pensions (from the Social Protection Fund and directly from the budget). Another 2.6% of GDP is spent on social allowances on temporary disability, childbirth allowance, family allowances, maternity pay, and disability. The IMF (2016) estimated government expenditures on housing and utilities subsidies to households of 1% of GDP.

**Table 2. General government expenditure and balance**

||**BYR mln***|**% of GDP**|
|---|---|---|
|**Total Expenditure & Grants**|**35 629.917**|**41.0**|
|Social Spending|23 131.264|26.6|
|Social Protection|12 991.387|14.9|
|Social Assistance_of which_|2 172.121|2.5|
|Noncontributory Pensions (Expenditure on social|684.931|0.8|
|protection, line “expenditure on old age”)|||
|Expenditure on family & children|168.322|0.2|
|Expenditure on housing|646.521|0.7|
|Other|672.346|0.8|
|Social Insurance (Social Protection Fund)**_of which_|10 819.266|12.4|
|Old-Age Pensions**|8 359.478|9.6|
|old age carer’s allowance, and funeral assis-|4 649.904|5.3|
|tance (financed by the SPF). Public expendi-|||
|tures on health care and education in Belarus|||
|are at the level of advanced economies (as a|||
|percentage of GDP). Indirect social spending|||
|also quite substantialEducation<sup>1</sup> _of which_|||
|Pre-primary and primary|977.513|1.1|
|Secondary|1 918.113|2.2|
|Post-secondary non-tertiary|476.392|0.5|
|Tertiary|793.725|0.9|
|Health<sup>2</sup>|3 872.301|4.5|
|Expenditure on housing & community amenities_of which_|1 617.671|1.9|
|Expenditure on community development|1 044.949|1.2|
|Spending on Defense, Public Order and Safety|2 622.543|3.0|
|Expenditure on public debt transactions|1 504.896|1.7|
|Grants|71.551|0.1|
|Other Government Expenditure|8 299.667|9.5|
|**Fiscal Balance**|||
|Primary net lending (+) / borrowing (–)|3 541.516|4.1|
|Net lending (+) /borrowing (–)|2 036.620|2.3|

* Taking into account denomination of 2016. 1, 2 Ministry of Finance of Belarus provides different figures for education and health care – BYR 4 186.4 mln and BYR 3 497.7 mln (denominated) respectively. These figures do not include investment financed within government investment programs. National classification by functions of government puts all financing of government investment programs under the line “Expenditure on general public services”, while GFS distributes these expenditures between the respective functional lines. Further imputation of health care and education subsidies is based on the Ministry of Finance data. _Source_ : GFS, except ** – Social Protection Fund of Belarus.

Although a large portion of the government expenditures was directed to subsidies to SOEs (4.7% of GDP in 2015), public investment (2.7% of GDP), and debt service (1.7% of GDP), the overall design of the redistribution system allows for inequality to remain relatively low. Not only government’s social programs, but also subsidies to the SOEs contribute to income redistribution. First, at least a part of SOEs have excessive employment (see Favaro et al., 2012; World Bank, 2012), such that government subsidies enable them to pay salaries to potentially unemployed people. Second, most of the SOEs bear the costs of cross-subsidization of utility tariffs, and, once again, government subsidies help them to pay higher tariffs for electricity, gas and utilities, while households pay below the level of cost recovery. Finally, SOEs apply the so called “wage grid” that sets different markups to some basic wages for different types of employees and puts limits on the difference between maximum and minimum wages 8