If President Vladimir Putin is preparing a radical overhaul of Russia’s wartime economy, he is keeping it very quiet. The country’s captains of industry and finance are carrying on as usual, drawing up budgets and publicly discussing their plans. A partial government reshuffle looks possible, but it’s unlikely to lead to a change in strategy.

The time for shifting to the much-discussed “mobilization economy” seems ripe. If the Kremlin ever intended to make that move, now would be the time, with Russia’s elections nearly out of the way.

Yet there is no sign that an economic revolution is being prepared. If Putin is planning one, he is keeping it secret from the officials who run his economy.

Coping without a coup

The Central Bank has published its annual monetary-policy blueprint as usual, complete with its perennial promise to bring inflation under control next year. Finance Minister Anton Siluanov, also sounding much as he always does, insists that “there are no problems” and that everything included in the budget is fully funded. In other words, everyone is calmly getting on with the job.

There are three possible explanations. Siluanov, Central Bank Governor Elvira Nabiullina and their colleagues may all be participating in an elaborate deception. Putin may be preparing an unpleasant surprise for the lot of them. Or he may believe that his officials can meet his demands without overturning the system.

In my opinion, the third explanation is more likely.

Budget execution for the first eight months of the year suggests that Russia’s finances remain far from healthy, but they are not getting worse. The deficit has even narrowed by 700 billion rubles ($8.3 billion), to 5.8 trillion rubles ($68.4 billion). That is enormous, though it is rapidly becoming the new normal.

That 700 billion rubles came from dividends, mostly from National Wealth Fund assets. Even without that money, the deficit would not have grown. Siluanov can be trusted to plug the budget hole, even if it is far larger than originally planned.

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Although oil revenue came in at a disappointing 1 trillion rubles ($11.8 billion) below the figure for the same period last year, a 2.4-trillion-ruble ($28.3 billion) rise in value-added-tax receipts came to the rescue. Raising VAT from 20% to 22% has, so to speak, saved the revenue side of the budget.

Overall revenue is only slightly below expectations. As usual, the problem is spending. Expenditures are running........

© The Moscow Times