World Bank: Russia does not have enough money to fulfill its social contract
Russia lacks the funds to fulfill its social contract with its citizens, reported television station Dozhd, citing a World Bank report titled “Ways of achieving inclusive economic growth” presented at the Gaidar Forum.
In Russia, the report indicates, the basis of the social contract is to provide citizens with jobs, cheap government services, and social benefits in exchange for giving authorities broad powers and the chance to play “the role of leader and manager.”
Over the course of the last 10 years, the report said, the population has increased its expectations of the state. Today, society expects the authorities to provide free medical care and education, as well as cheap housing and communal services. However, these expectations, said the World Bank, can no longer be met.
Russia’s investment in social expenses, the report said, was made at the expensive of other obligations, including investment in social and communal infrastructure, health, and education. As a result, such services no longer meet the expectations in terms of quality and fairness.
Russia, the report said, urgently needs to start investing in the social, communal, transport, and energy sectors.
“In 2012-2014, the Russian government spent less than 1 percent of its GDP on infrastructure annually, though the need for investment was estimated at $ 1 trillion, i.e. 75 percent of Russia’s GDP in 2015,” reported news agency TASS, citing the World Bank report.
Russian authorities, said the World Bank, will also need to implement reforms aimed at increasing productivity, the development of human capital, and the improvement of public administration.
“Reforms should be carried out urgently … before falling commodity prices contribute to great budgetary problems and demographic changes begin to put too much pressure on the demand for manpower and budgetary resources,” the report read, according to news source Finmarket.
Today, the state is finding it increasingly more difficult to find a balance between maintaining social support at previous levels and a sustaining its budget, concludes the World Bank.
In 2016, Russian authorities refused to adjust pensions and social benefits for inflation. Instead, it was decided that, starting in January 2017, all those benefiting from pensions and social benefits would receive a lump monthly payment of five thousand rubles (approximately $84).
This does not apply to pensioners living permanently outside of Russia.
On February 1, 2017, pensions and other social benefits are expected to be adjusted by 5.4 percent for inflation. A second adjustment will follow at an unspecified point.
After a sharp deterioration in Russia’s economic situation in late 2014, it was also decided to cease adjusting the salaries of particular types of state employees, as well as the pensions of working pensioners, for inflation.