* Secret public spending to reach 25 pct of total by 2016
* Compares with less than 1 pct in some other G20 countries
* IMF urges more comprehensive budget reporting
* IMF urges more disclosure, better analysis of policy risks
By Lidia Kelly
MOSCOW, May 26 Russian public spending that is
classified as secret will nearly double by 2016 to reach a
quarter of all expenditures, the IMF said on Monday, 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
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
GIANT PUBLIC ECONOMY
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 (GDP) 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
"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.
No consolidated fiscal report covers the large public
corporation sector, which also has large asset and liability
holdings, the IMF said.
The largest 26 public corporations had liabilities of around
102 percent of GDP in 2012, compared with general government
debt of 11 percent.
"Understanding the financial position of these entities and
their relationship with the government is therefore critical to
understanding the financial position and sustainability of
Russia's public sector as a whole," the Fund said.
RISK ANALYSIS ABSENT
The Fund said that Russia's management of fiscal risks has
significantly improved, but reporting and analysis of near-term
risks was incomplete and fragmented and forecasts of longer-term
pressures were not forward-looking enough.
There was also no analysis of the implications for public
finances from the government's different growth scenarios that
take into account the oil price, the rouble's exchange rate and
global developments, it said.
"While low government debt and large oil and gas reserves
provide room to accommodate fiscal shocks, the fiscal risks it
faces are large and diverse," the Fund said.
The main risks, it said, came from instability in oil and
gas prices as energy accounts for more than one-fifth of GDP,
two-thirds of exports and a third of government revenues.
"Given the volatility of international energy prices, it is
not surprising that Russia's nominal GDP growth and government
revenue growth have been among the most volatile in the G20 over
the past decade," the Fund said.
A permanent reduction of $10 per barrel in the oil price or
a 10-percent appreciation of the rouble would increase the
budget deficit by about 1 percent of GDP next year, it
The Fund put the current value of government revenues from
oil and gas reserves at around 200 percent of GDP - which is not
included in the state budget.
The Fund's projections showed revenues from these reserves
were likely to fall as a share of GDP - possibly from 9 percent
now to 2 percent of GDP in 50 years.
If prices were to remain at current levels, then revenues
would fall to around 0.5 percent of GDP by 2063.
"This type of analysis is particularly important, given the
demographic trends ... which are likely to create additional
demand for public sector expenditure on pensions and healthcare
over the long-term," the Fund said.
The Fund estimated the government had unreported pension
liabilities worth nearly triple GDP. It said that on current
projections, the costs of providing pensions for Russia's aging
population of 140 million through 2050 were among the highest in
(Reporting by Lidia Kelly; Editing by Ruth Pitchford)