Russian Ministry of Finance Proposes Defense Cuts

  • The service term has to be 25 years.
  • The cuts would include 10% of the military force.
  • It would save a projected 20 billion roubles annually.

Russian Ministry of Finance (MinFin) announced proposed changes on October 19 pertaining to the defense budget. The new proposals are expected to save 20 billion Rubles ($257.4 million) annually. It is expected that law enforcement agencies would be restructured as well.

Ministry of Finance of the Russian Federation is a federal ministry, responsible for general financial policy and for general management in the field of finance of the Russian Federation.

These proposals have been sent to the Russian Security Council.

The Proposals Include: 

  1. A reduction in the number of troops
  2. An increase in the length of service required for retirement
  3. Abolition of the indexation of pension payments
  4. Reforms to the law enforcement unit

The latter would mean creating a single organization that would be amalgamated. According to the document, at least two positions in the “army” list of the Ministry of Finance are identical to those contained in the proposals for the Ministry of internal Affairs:

  1. Optimization of the management apparatus, by bringing the ratio of the number of superiors to the number of subordinates
  2. The creation of a single settlement center, and a single logistics system for the power unit

At present, the Russian Ministry of Defense will be reviewing the proposal. Additionally, the Russian Ministry of Finance offers to do this at the expense of vacancies, as well as transferring to the civil service those whose activities are not related to the performance of combat missions.

Sergey Shoygu is a Russian politician and General of the Army who has served as Minister of Defence of the Russian Federation and as Chairman of the Council of Ministers of Defense of the CIS since 2012.

Hence, it would mean a reduction of employees by 10%. Managers often keep 10-15% of jobs available just in case of a crisis, so that they do not have to dismiss working employees. However, the budget savings, according to very rough estimates of the expert, can reach 3% of GDP.

According to the trading economics, GDP in Russia is expected to reach $1.25 trillion by the end of 2020. It should be noted that the average salary of a Russian army member is 50,000 roubles monthly ($643).

The new proposals also suggest billing military personnel for the costs of uniforms if they leave the military early. There is also expected to be a service increase to 25 years. This length will not include military university education. However, it would mean that Russian nationals would have to enlist before the age of 25.

Another proposed rule is to extend the service life to the right to a “military mortgage.” Today, an officer can become a member of the savings and mortgage system (NIS) immediately after graduation, and a soldier or contract sergeant after three years of service.

From this point on, they have a current account, which is credited with funds on a monthly basis. After a few years, the serviceman is entitled to receive a targeted housing loan. According to the initiative of the Ministry of Finance, officers will be able to become a member of the NIS five years after graduation, and contract soldiers after eight years of service.

Such changes will have a lot of negative reactions. However, the Kremlin will make the final decision pertaining to the proposals.

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Christina Kitova

I spent most of my professional life in finance, insurance risk management litigation.

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