A budget deficit is the excess of expenses over income. Balancing budgets at all levels is a necessary condition for fiscal policy.

If there is a budget deficit, priority financing is given to expenses included in the current expenditure budget. The size of the federal budget deficit cannot exceed the total volume of budget investments and expenses for servicing the public debt of the Russian Federation in the corresponding financial year.

The size of the budget deficit of a constituent entity of the Russian Federation cannot exceed 15% of the volume of budget revenues of the constituent entity without taking into account financial assistance from the federal budget.

The size of the budget deficit of the local budget, approved by a normative act of a representative body of local self-government, cannot exceed 10% of the volume of local budget revenues without taking into account financial assistance from the federal budget and the budget of a constituent entity of the Russian Federation.

If, in the process of budget execution, the maximum deficit level is exceeded or there is a significant decrease in revenue from budget revenue sources, then a mechanism for sequestration of expenses is introduced, which consists of a proportional reduction in government spending (by 5, 10, 15, and so on percent) monthly on all budget items during remaining time of the current financial year. Protected articles are not subject to sequestration.

Loans from the Bank of Russia, as well as the acquisition by the Bank of Russia of debt obligations of the Russian Federation, constituent entities of the Russian Federation, and municipalities during their initial placement cannot be sources of financing the budget deficit.

The sources of financing the federal budget deficit are:

1. internal sources in the following forms: loans received from credit institutions in Russian currency; government loans carried out by issuing securities on behalf of the Russian Federation; budget loans and budget credits received from budgets of other levels of the budget system; proceeds from the sale of state-owned property; the amount of excess of income over expenses on state reserves and reserves; changes in fund balances in federal budget accounts;
2. external sources in the following forms: government loans made in foreign currency by issuing securities on behalf of the Russian Federation; loans from foreign governments, banks and firms, international financial organizations, provided in foreign currency.

Additional funds

State credit reflects credit relations regarding the state's mobilization of temporarily free funds of enterprises, organizations and the population on a repayable basis to finance government spending.
The lender is individuals and legal entities, the borrower is the state represented by its bodies.

The state attracts additional financial resources by selling bonds and other government securities on the financial market. This form of credit allows the state to attract additional financial resources to cover the budget deficit without issuing emissions for these purposes.

State credit is also used to stabilize money circulation in the country.

State loan classification:

1. Depending on the borrower, government loans are divided into those placed by central government bodies and those placed by local government bodies.
2. At the location of the state credit can be internal and external.
3. By terms of attraction: short-term (up to a year); medium-term (from one to 5 years); long-term.

The size of the government loan is included in the amount of the country's public debt.

Balancing budgets at all levels is a necessary condition for fiscal policy. The excess of expenses over income constitutes a budget deficit. Budget surplus is the excess of budget revenues over its expenses;

If there is a budget deficit, priority financing is given to expenses included in the current expenditure budget. The size of the federal budget deficit cannot exceed the total volume of budget investments and expenses for servicing the public debt of the Russian Federation in the corresponding financial year.

The size of the budget deficit of a constituent entity of the Russian Federation cannot exceed 15% of the volume of budget revenues of the constituent entity without taking into account financial assistance from the federal budget.

The size of the local budget deficit, approved by a regulatory act of a representative body of local self-government, cannot exceed 10% of local budget revenues without taking into account financial assistance from the federal budget and the budget of a constituent entity of the Russian Federation.

If, in the process of budget execution, the maximum deficit level is exceeded or there is a significant decrease in revenue from budget revenue sources, then a mechanism for sequestration of expenses is introduced, which consists of a proportional reduction in government spending (by 5, 10, 15, and so on percent) monthly on all budget items during remaining time of the current financial year. Protected articles are not subject to sequestration (their composition is determined by the Federal Assembly of the Russian Federation, as well as by the representative authorities of the constituent entities of the Russian Federation).

Sources of financing the budget deficit are approved by the legislative (representative) authorities in the budget law for the next financial year according to the main types of funds raised.

Loans from the Bank of Russia, as well as the acquisition by the Bank of Russia of debt obligations of the Russian Federation, constituent entities of the Russian Federation, and municipalities during their initial placement cannot be sources of financing the budget deficit.

Sources of financing the federal budget deficit are:

1) internal sources in the following forms:

loans received from credit institutions in Russian currency;

government loans carried out by issuing securities on behalf of the Russian Federation;

budget loans and budget credits received from budgets of other levels of the budget system;

proceeds from the sale of state-owned property;

the amount of excess of income over expenses on state reserves and reserves;

changes in fund balances in federal budget accounts;

2) external sources in the following forms:

government loans made in foreign currency by issuing securities on behalf of the Russian Federation;

loans from foreign governments, banks and firms, international financial organizations, provided in foreign currency.

State credit reflects credit relations regarding the state's mobilization of temporarily free funds of enterprises, organizations and the population on a repayable basis to finance government spending.

The lender is individuals and legal entities, the borrower is the state represented by its bodies.

The state attracts additional financial resources by selling bonds and other government securities on the financial market. This form of credit allows the state to attract additional financial resources to cover the budget deficit without issuing emissions for these purposes.

State The loan is also used to stabilize money circulation in the country.

Classification of government credit.

1. Depending on the borrower, government loans are divided into:

¨ placed by central management bodies;

¨ placed by local authorities.

2. At the location of the state. credit can be internal and external.

3. By terms of attraction:

· short-term (up to a year);

· medium-term (from one year to 5 years);

· long-term.

The size of the government loan is included in the amount of the country's public debt.

The Budget Code sets limits on the size of the budget deficit and regulates how it is covered. Article 92 of Chapter 13 of the Budget Code of the Russian Federation defines the maximum size of budget deficits at different levels. The budget for the next financial year cannot be approved with a deficit exceeding this limit.

Deficit size federal budget cannot exceed the size of the non-oil and gas deficit of the federal budget. The non-oil and gas federal budget deficit is the difference between the volume of federal budget revenues excluding oil and gas revenues of the federal budget and income from the management of the Reserve Fund and the National Welfare Fund and the total volume of federal budget expenditures in the corresponding financial year. The non-oil and gas deficit of the federal budget cannot exceed 4.7 percent of the gross domestic product forecast in the corresponding financial year, specified in the federal law on the federal budget for the next financial year and planning period.

The size of the budget deficit of a constituent entity of the Russian Federation cannot exceed 15 percent of the budget revenues of a constituent entity of the Russian Federation, excluding financial assistance from the federal budget.

If the law of a constituent entity of the Russian Federation on the budget for the corresponding year approves the amount of proceeds from the sale of property, the maximum amount of the budget deficit of a constituent entity of the Russian Federation may exceed this limit, but not more than by the amount of proceeds from the sale of property.

At the same time, budget revenues must fully cover its current expenses. Sources of financing regional budget deficits can only be used to cover investment costs; these funds cannot be used to service and repay the debt of the constituent entities of the Russian Federation.

The size of the local budget deficit cannot exceed 10 percent of local budget revenues without taking into account financial assistance from the federal budget and the budget of a constituent entity of the Russian Federation.

If a normative act of a representative body of local self-government on the budget for the corresponding year approves the amount of proceeds from the sale of property, the maximum amount of the local budget deficit may exceed this limit, but not more than by the amount of proceeds from the sale of property.

Receipts from deficit financing sources can also be used only for investment expenditures.

Compliance with the budget deficit limits established by the Budget Code must be ensured according to the report on the execution of the relevant budget for the financial year.

If a budget for the next financial year with a deficit is adopted, the relevant law (decision) on the budget approves the sources of financing the budget deficit.

A similar norm regulates the size of the local budget deficit, but here this size cannot exceed 10% of local budget revenues without taking into account financial assistance from the federal and regional budgets.

From all of the above, two important conclusions can be drawn:

• firstly, current budget expenditures must be supported by revenues;
• secondly, the funds raised are used exclusively for investment purposes and for servicing the public debt of the Russian Federation under the federal budget.

Sources of financing the budget deficit are approved by the legislative authorities in the law on the budget for the next year according to the main types of funds raised. At the same time, loans from the Central Bank of the Russian Federation, as well as its acquisition of debt obligations of the Russian Federation, constituent entities of the Russian Federation, and municipalities during their initial placement cannot be sources of financing the budget deficit.

Sources of deficit financing vary by budget level.

The federal budget deficit is financed from both domestic and external sources. The following sources are internal:

• ruble loans from banks;
• government loans carried out by issuing securities on behalf of the Russian Federation;
• proceeds from the sale of state-owned property;
• the amount of excess of income over expenses on state reserves and reserves;
• changes in account balances for federal budget funds.

External sources of financing the federal budget deficit include:

• government loans in foreign currency by issuing securities on behalf of the Russian Federation;
• loans from foreign governments, banks and firms, international financial organizations in foreign currency, attracted by the Russian Federation.

To finance the budget of a constituent entity of the Russian Federation and the local budget, only internal sources can be attracted:

• government loans carried out by issuing securities on behalf of a constituent entity of the Russian Federation;
• budget loans and budget credits received from budgets of other levels;
• bank loans;
• proceeds from the sale of property owned by a constituent entity of the Russian Federation;
• changes in account balances for accounting for budget funds of a constituent entity of the Russian Federation.

Sources of financing the local budget deficit can be internal sources in the following forms:

• municipal loans, carried out by issuing municipal securities;
• bank loans;
• budget loans and budget credits received from budgets of other levels;
• proceeds from the sale of municipal property;
• changes in account balances for local budget funds.

As can be seen from these lists, the most common form of financing budget deficits is all kinds of borrowing, the classification of which is given in the following table:

Government borrowings of the Russian Federation– loans and credits for which debt obligations of the Russian Federation arise as a borrower or guarantor of repayment of loans (credits) by other borrowers, attracted from: individuals and legal entities; foreign countries; international financial organizations

External borrowings– loans and credits that generate debt obligations of the Russian Federation expressed in foreign currency

Internal borrowing– loans and credits for which debt obligations of the Russian Federation arise, expressed in rubles

Borrowings from constituent entities of the Russian Federation, municipal borrowings– loans and credits attracted from individuals and legal entities for which debt obligations arise, respectively, of a constituent entity of the Russian Federation or a municipal entity as a borrower or guarantor, expressed in the currency of obligations

From the table above it follows that loans can be obtained from individuals and legal entities, foreign states, and international financial organizations. However, municipal loans are attracted only from legal entities and individuals.

Global financial experience has developed a number of methods for preventing budget deficits and ways to eliminate them. Currently, the following ideas about this form of budget imbalance are generally accepted.

If the budget deficit is evil, then an even greater evil for the economy and the financial system is its imaginary elimination through purely mechanical manipulations. In this case, the disease takes on hidden forms that are much more difficult to treat.

Budget balance and even the excess of budget revenues over expenses should not be considered as an integral property of a healthy, dynamically developing economy. A temporary budget deficit is quite acceptable.

The size of the budget deficit should not exceed the maximum permissible size, estimated at 2-3% of gross domestic product.

Various methods can be used to cover the deficit:

1. internal and external loans;
2. tightening of taxation;
3. monetary emission (budget monetization).

None of these methods has absolute advantages over others and is not completely non-inflationary.

But various forms of state credit are more preferable in this regard.

Traditionally, measures aimed at reducing the budget deficit are those that, on the one hand, stimulate the flow of budget revenues, and on the other, help reduce government expenses. These include:

• changing the directions of public investment in sectors of the economy in order to significantly increase the financial return of budget funds;
• wider use of financial incentives and sanctions.

This allows us to more fully take into account specific economic conditions and stimulates production growth;

• reduction in the scope of government funding (government assistance to foreign states; military spending, etc.) while maintaining funding for only the most important social programs;
• a ban on the central bank providing loans to government agencies at any level without proper registration of debt in government securities.

In recent years, the federal budget has been running a surplus. This situation is explained mainly by the favorable price environment for Russia on the global energy market, of which our country is one of the leaders. However, the situation may change, oil and gas prices will fall, and in such conditions it will be extremely difficult to balance the budget. A preventive measure by the state is the formation of the Stabilization Fund of the Russian Federation (hereinafter referred to as the Fund), which will be used to ensure budget balance when the oil price decreases below the base price.

In 2004, the entire budget surplus (RUB 83,403.4 million) was allocated to the formation of the Fund. It is formed from part of the federal budget when the price of oil exceeds the base price of Urals crude oil, which is determined at $146 per ton, or $20 per barrel.

The level of this price is determined in the manner prescribed for establishing the rate of export customs duty on crude oil.

The fund has two sources:

1. additional federal budget revenues received due to the excess of the oil price over the base price.
2. balances of federal budget funds at the beginning of the financial year, including income received from the placement of funds from the Fund.

These balances are credited to the Fund until February 1 of the year following the reporting year. At the same time, the following are not credited to the Fund: a) balances for which the law on the budget or an international treaty of the Russian Federation establishes a different procedure for use; b) free balances of budget funds necessary for the Ministry of Finance to cover intra-annual temporary cash gaps, in the amount of 1/24 of budget expenditures approved for the year, including payments to repay external public debt, excluding funds sent to the Pension Fund of the Russian Federation for the payment of the basic part of the labor pension.

The Government of the Russian Federation, based on the results of its consideration of the report on the execution of the federal budget for the previous financial year, before June 1 of the current year, clarifies the volume of budget balances to be used in accordance with the budget law for the corresponding year.

The Fund's funds can be used:

1. to finance the federal budget deficit when oil prices fall below the base price;
2. for other purposes, if their accumulated volume exceeds 500 billion rubles.

The volumes of use of these funds are determined by the law on the federal budget.

The Budget Code of the Russian Federation defines the procedure for managing the Fund's funds. Management is carried out by the Ministry of Finance in the manner determined by the Government of the Russian Federation. Certain management powers may be exercised by the Central Bank of the Russian Federation under an agreement with the Government of the Russian Federation. The Fund's funds may be invested in debt obligations of foreign states, the list of which is approved by the Government of the Russian Federation.

Transactions with the Fund's funds are reflected in separate accounts of the federal treasury.

The Government of the Russian Federation sends quarterly (cumulative) and annual reports to the State Duma and the Federation Council on the receipt of funds into the Fund, their placement and use as part of reporting on the execution of the federal budget. The Ministry of Finance of the Russian Federation publishes monthly information on the Fund’s balances at the beginning of the reporting month, the volume of funds received by the Fund and their use in the reporting month.

When establishing norms regulating the budget deficit, the Budget Code of the Russian Federation introduces a number of restrictions.

If a budget for the next financial year with a deficit is adopted, the law (decision) on this budget approves the sources of financing the budget deficit.

The size of the federal budget deficit should not exceed the total volume of budget investments and expenses for servicing public debt. Current expenses of the budgets of the constituent entities of the Russian Federation and local budgets cannot exceed their income. The size of the budget deficit of a constituent entity of the Russian Federation cannot exceed 15% of the budget revenue of a constituent entity of the Russian Federation without taking into account financial assistance from the federal budget. Proceeds from sources of financing the budget deficit of a constituent entity of the Russian Federation are used only to finance investment expenses and cannot be used to finance the costs of servicing and repaying the debt of a constituent entity of the Russian Federation. The size of the local budget deficit cannot exceed 10% of local budget revenue without taking into account financial assistance from the federal budget and the budget of a constituent entity of the Russian Federation. Proceeds from sources of financing the local budget deficit are used only to finance investment expenses and cannot be used to finance the costs of servicing and repaying municipal debt.

Classification of budget deficit.

Types of budget deficit:

Structural.

Cyclical.

Sources of financing budget deficits

Sources of financing the budget deficit are approved by the legislative authorities in the budget law for the next financial year according to the main types of raising funds. Loans from the Bank of the Russian Federation, as well as the acquisition of municipalities during their initial placement, cannot be sources of financing the budget deficit.

Sources of financing the federal budget deficit are:

a) internal sources:

loans received by the Russian Federation from credit institutions in Russian currency;

government loans carried out by issuing securities on behalf of the Russian Federation;

budget loans received from budgets of other levels of the budget system;

proceeds from the sale of state-owned property;

the amount of excess of income over expenses on government reserves and reserves;

changes in fund balances in federal budget accounts.

b) external sources:

government loans made in foreign currency by issuing securities on behalf of the Russian Federation;

loans from foreign governments;

loans from banks and foreign companies;

loans from international financial organizations provided in foreign currency.

Sources of financing the budget deficit of a constituent entity of the Russian Federation There are only internal sources in the form:

government loans carried out by issuing securities on behalf of a constituent entity of the Russian Federation;

proceeds from the sale of property owned by the state of a constituent entity of the Russian Federation;

changes in fund balances in accounts for accounting for budget funds of a constituent entity of the Russian Federation.

Sources of financing the local budget deficit There can only be internal sources in the form:

municipal loans carried out by issuing municipal securities;

budget loans received from budgets of other levels of the budget system of the Russian Federation;

loans received from credit institutions;

proceeds from the sale of municipally owned property;

changes in fund balances in local budget funds accounts.

Features of internal sources of financing the budget deficit This is due to the fact that the Government of the Russian Federation is constantly increasing the terms of borrowing on the domestic market, which naturally leads to a general restructuring of debt and a change in the ratio of government securities with different maturities.

This practice reduces the level of trust of legal entities and individuals who are investors in the securities market. Guarantees of stability of securities, including maturity dates, mean not only trust in the government, but also maintaining minimal investment risks for the long term.

External sources of financing the budget deficit ensure the flow of foreign currency into the budget to finance current expenses and import purchases.