Russian president Vladimir Putin has criticised his government for “red tape” that is imperilling investment projects — a tacit acknowledgment of rising public discontent over low state spending.

While Russia’s economy has stalled and household incomes are under pressure, high oil prices and fiscal belt-tightening has helped Moscow to rack up budget surpluses and amass a rainy day wealth fund worth almost 8 per cent of gross domestic product. 

However, spending on “national projects”, a $390bn initiative promised by Mr Putin last year as the cure to Russia’s economic ills, has been well below planned levels, while the country’s government and its central bank have argued over how to invest unspent cash.

In a meeting with prime minister Dmitry Medvedev on Monday, Mr Putin requested that the government “focus not only on financing as such — I hope that all this will be implemented — but on the red tape of decision-making with a view to ensuring the rhythm of funding”, according to a transcript released by the Kremlin.

The comments suggest Mr Putin is seeking to pin blame for the economic woes and parsimonious approach on Mr Medvedev, who as head of government is supposed to oversee domestic issues such as the economy with the help of his ministers, but in effect takes his orders from the president.

“Even this year, unfortunately, [spending] does not work out the way we originally planned,” Mr Putin continued. “I am absolutely sure that if we want to carry out these national projects on which we have been working together for so long, then we need to change many things in terms of ensuring the rhythm and timeliness of financing.”

READ ALSO  The smiling ex-general who has become Indonesia’s ‘Mr Fixit’

Mr Medvedev replied: “We will deal with just this kind of bureaucracy.”

Russia’s budget surplus in the first eight months of 2019 totalled Rbs2.56tn ($40bn), and is on track to be roughly double the planned amount for the entire year. At the same time, spending on the national projects — which cover areas such as building new motorways, investing in schools and digitising government — is running at less than 50 per cent of planned annual levels.

“The first available data on the national projects suggests that they are getting off to a relatively slow start,” Ivan Tchakarov, an analyst at Citi in Moscow, wrote last week. “The central bank has claimed that the budget underspending, including on national projects, has been a key reason for the softer GDP growth.”

The economy is expected to grow about 1 per cent in 2019, held back by the impact of international sanctions, levied after Moscow’s 2014 annexation of Crimea, and tightened government spending.

Reflecting sluggish growth, real disposable incomes for Russians have fallen for five of the past six years, fuelling public anger at Mr Putin’s regime and prompting a surge in household borrowing.

But the Kremlin has been loath to open the spending taps too much because of fears over possible further western sanctions or the threat of a global recession. The central bank has also clashed with finance ministry officials by saying keeping a lid on inflation is more important than fiscal stimulus.

Mr Medvedev said on Monday that the 2020 budget would double spending on healthcare to Rbs320bn, increase education spending by 20 per cent and more than double funding for environmental programmes.

READ ALSO  Beijing's medical supply exports soar in 2020

He promised the budget would “solve the problems, first of all, of raising the standard of living of people and the country’s economic development”.

Russia’s national wealth fund is expected to have doubled in size over the course of 2019 to about $123bn, equivalent to just under 8 per cent of the country’s GDP, thanks to oil prices staying above the budget’s break-even oil price of around $49 a barrel.

Via Financial Times