Russia spending on rise, budget risks not properly assessed: IMF

May 27, 2014 - 12:22:45 am

MOSCOW: Russian public spending that is classified as secret will nearly double by 2016 to reach a quarter of all expenditures, the IMF said yesterday, urging more disclosure and analysis of budget risks.

The International Monetary Fund also said financial reporting on the public sector — which accounts for more than two-thirds of Russia’s $2-trillion economy — was not comprehensive enough. The category includes government entities and state-controlled firms. The amount of hidden, unspecified expenditure in the federal budget has increased in recent years, the Fund said in a report, with more areas of spending now classified as secret for national security reasons.

That share stood at nearly 14 percent of total expenditure last year and is forecast to increase to close to 25 percent in 2016.

The Fund did not give comparisons for all nations in the Group of 20 developed and developing economies but said several of them classify less than 1 percent of total budget expenditure as secret.

In the 80-page report, the IMF gave good marks overall to the finance ministry, which requested the evaluation. But it said fiscal reports left out a number of government-controlled firms with liabilities of at least 127 percent of gross domestic product in 2012.

The Russian public sector comprised 81,954 separate institutional entities as of last year, including 31,092 public corporations. Of the latter, 308 were purely government corporations and more than 10,000 companies were “unspecified government-controlled entities.”

“The size of the public corporation sector and the lack of transparency around its financial performance create significant fiscal risk for the government,” the IMF said in its report done on the request of the Russian finance ministry.

The government itself, whose expenditures account for about 60 percent of the public sector, provides the most comprehensive financial reports but still leaves out some major entities.