ON THE RUSSIAN ARMED FORCES FINANCING

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According to federal law “On the federal budget for 1998” this year the volume of expenses for the national defense should amount to some 3.5% of the gross domestic product. This digit is a bit less than the digit planed by the budget of 1997. However the last year’s budget was sequestrated, that is why the share of the defense expenses in 1997 did not exceed 3% of the gross domestic product.

For the first time the defense budget of 198 does not take into account the expenses for pensions to the former servicemen. They are mentioned in section “Social policy. Overall section “National defense of federal law “On the federal budget for 1998” is represented having more details than in the previous years.

The budget is strict. The state plans to allot as much money for the defense as it can afford. Along with this it is specially stressed that the assignments for the troops reduction and repayment of money allowances for released officers and warrant officers will be sufficient, in case if the money is transferred completely and in due time.

However the Defense Ministry calculated that for solving of the housing problem it will be necessary to find 2.9 billion rubles additionally. Besides additional funds are necessary for financing of expenses, appearing in connection with the released military infrastructure objects, armament, combat equipment, ammunition and other property.

Where from is it planned to take these funds? For finding of these sums the government and the State Duma suggested the provision in the law “On the federal budget for 1998”, according to which besides the assignments, suggested for the national defense, the budget fund for assistance to the military reform will be organized, amounting to 1% of the federal budget expenses (except for the defense expenses and state debt servicing).

Part of the income of the customs system development and part of the money, received from the federal property privatization at bids and auctions, will be also spent for financing of the housing construction for the released servicemen. Meanwhile the problem of the servicemen’s money allowances indexing still remains unsolved. As is known, the federal government (the Finance Ministry) offered the President to raise the servicemen’s money allowances by 1.06% since November 1 of 1998, as well as about cancellation of some benefits: 25% increase of the wages for the service in the Armed Forces, pension bonus, money compensation for the sanitarium and resort treatment, bonuses for good fulfillment of the service duties. These suggestions are currently being considered by the state organs. The mass media published the information that the Defense Ministry is against the servicemen’s benefits cancellation and support raising of their money allowances. For this purpose suggestions were sent to the Finance Ministry, signed by Defense Minister Igor Sergeev, about gradual raising of the servicemen’s money allowances. In particular, during the stage (by July 1 of 1998) it is offered to raise the money allowances according to the military posts by 0.65% and the money allowances according to the military ranks by some 100% without cancellation of the benefits, offered by the government. Suggestions, coordinated with al interested federal executive organs will be represented to the government chairman and tot he President.

Probably this will be done on account of the extra-budget funds: foreign credits and state property sale. A special law or presidential decree about this may be issued. There are many ways for solving of this problem. We would like to hope that since the President promised the servicemen to raise their money allowances, he will find the money for this, although the situation in this sphere is very difficult.

According tot he Defense Ministry, as of January 1 of 1998 the total debts of the Defense Ministry to the suppliers amounted to 37.1 billion rubles. 10.6 billion of debts are planned to be repaid by sets off after the final calculation of the debts. Meanwhile the Defense Ministry is very much concerned about its debts growth concerning the personnel wages and benefits. Now this sum amounts to some 10 billion rubles, including 4 billion of the money allowances and wages for February-March, 5.7 billion of social and compensation benefits and 2 billion of the annual bonus for 1997.

These are very big digits, if we take into account that the state collects not more than 13 billion rubles of taxes monthly. Probably due to this, for example, in March only 3.4 billion rubles were transferred to the Armed Forces instead of the planned 6.75 billion. Along with this the combat training expenses were not financed at all. Overall, in the first quarter of 1998 only 1/3 of the budget assignments for this period was transferred to the Armed Forces.

The government is evidently looking for the ways to solve this problem. Last week during his meeting with Defense Minister Igor Sergeev nominee for the premier Sergei Kirienko said that financial problems of the Armed Forces will be solved: “by finding of the additional incomes sources on account of sale of the released military property and reduction of expenses for the Armed Forces maintenance, being currently carried out by the Defense Ministry”.

On January 27 of 1998 the defense Ministry signed the order “On gradual transition tot he accounting control over the budget and extra-budget funds spending”. By January 1 the new accounting system should be completely established in the troops. This will allow to more strictly control the spending of money in the troops and save it. Along with this all actions for introduction of the accounting personnel posts will be carried out within the current authorized strength of the Armed Forces. Along with this the status of the accountants will be risen.

However many military experts think that these are semi-measures, and that in the future the Armed Forces financing will be worsened, and the debts will grow. The Armed Forces reduction demands money. The budget does not have enough. The full-scale sale of the released military property by the State Property Ministry was not started yet. However the existing experience of the Defense Ministry in this sphere demonstrates that the defense budget will be refilled only by 0.1-0.3% on account of this. Reduction of expenses for the Armed Forces maintenance in 1998 is not suggested as well, since we can expect financial profit from the current troops reduction only within 2-3 years, when he state completely repays its debts to the released officers and warrant officers.

Thus, in the near future the Armed Forces financing will hardly be improved. The huge debts to the Armed Forces demonstrate a severe economic crisis in the country. Comparing the Armed Forces financial problems with the analogous problems of the state, some competent military experts suggest that in 1998 the federal budget will be sequestrated, and if the economic situation keeps on aggravating due to the international economic crisis, he de-evaluation of the ruble is possible. Against this background many experienced officers consider assurances of some country leaders in rapid repayment of debts to the Armed Forces as another populist step, connected with formation of the new government.

The fact that the Armed Forces social problems are not solved, can negatively influence not only their controllability and combat-readiness, but can even result in the protest and disobedience actions of the troops. The radical parties and movements, who made up their mind to achieve impeachment of the President, call for this.

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