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In 2005, the government will begin reforming the budget system
In 2005, the government will begin reforming the budget system, Deputy Prime Minister Alexander Zhukov said at an investment conference Tuesday. According to him, the government intends to reform the budgetary expenditures system and change the principle of their formation from the inertia principle (when the budget expenditures are summarized and indexed with due account for inflation) to the principle of formation considering the final result. "Next year," he said, "we will begin reforming budget expenditures and orienting them to the final result," Mr. Zhukov said. He said the reform would be a boon for businesses, and would also enable the government to more use the budget funds more effectively, which are not always spent efficiently today. He said that to start reforming the budget system, it was necessary for the Russian government to make a final decision on the objectives of the reforms and on the indicator to be used to determine the reforms' effectiveness. "The objective we set in this sphere are linked with the investment climate in Russia," he noted. As he said, different indices, such as the index of business competitiveness or the index of economic capacity, could be used as indicators for the reform. "I think that these are obvious things for businessmen," he said. "Regrettably, the Russian budget is not guided by these principles now." Mr. Zhukov said, "by the end of this year, the stabilization fund may come close to 600 billion rubles" (more than $20 billion). In Mr. Zhukov's opinion, next year, the stabilization fund will possibly "exceed 800 billion rubles." Mr. Zhukov noted that the sizeable stabilization fund provided the possibility of "a serious structural maneuver in the tax sphere." He recalled that in 2005, it was planned to considerably reduce the maximum rate of the unified social tax, which will lead to a Pension Fund deficit as well as a deficit in the social insurance fund and the compulsory medical insurance fund. "These deficits are supposed to be covered by additional revenues from the oil and gas sector, i.e., spend part of the financial resources, accumulated in the stabilization fund, on this," Mr. Zhukov explained. "This structural maneuver in the tax sphere will allow us to find new possibilities for additional economic growth," he stressed. He said, "serious structural changes and continuation of the reforms" were necessary for doubling GDP by 2010. "This compels us to use the favorable foreign economic and stable political situation to carry out further reforms," Mr. Zhukov said. According to his forecast, the growth of GDP in Russia by the end of this year will make up around 7%, and inflation will be kept within 10%. The sectors linked with communication and some types of machine building have been growing at the highest rates, he said. "There is a widespread opinion that the sectors linked with the fuel and energy complex have been growing at the highest rates in Russia," he said, "but it is not quite true. Today the highest growth rates are observed in communication and some kinds of machine building."
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