Russia’s failing privatization may cause $30bn budget shortfall

3 Jul, 2013 14:19 / Updated 11 years ago

Withdrawing strategic enterprises from sale and privatization delays may cause Russia’s budget to receive less than it was planned from the country’s privatization program in 2014-2016, according to the Finance Ministry calculations.

Initially the state budget was supposed to get 925 billion roubles ($28bn) from state assets sale in the next 3 years.

However, the current assessment of risks sees Russia's budget short of 887 billion roubles ($27bn)  from the privatization program in 2014-2016, Ria Novosti quotes unpublished Finance Ministry documents. In other words, the Finance Ministry admits that in the worst case, the privatization program could almost completely fail, Lenta.ru reports.

The Finance Ministry warns that the shortfall of funds from privatization could lead to cuts in the Federal Reserve fund. It could reach 3.8 percent of GDP instead of the planned 5.1 percent, RIA Novosti reports.

The new privatization program for the next three years was adopted by the government at the end of June. The new version sees the Russian government holding back on the privatization of several major state enterprises and retaining control of the Rosneft oil company.

This year the budget revenues from privatization this year could reach $2bn billion instead of the planned $13bn, the Finance Ministry reported in March 2013.  Revenues from the privatization collapse because some state-owned companies get privatized through additional share issue instead of offering state shares to investors. This means that income from the sale goes directly to the companies, not to the budget, Lenta.ru reports. Such a scenario, in particular, has been used for the secondary public offering of VTB in May 2013.