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Russia faces a dilemma in budget management

16 February 2009 10:41 (UTC +04:00)

Bakuâ€“ APA-Economics. The Russian government faces a tough choice between scaling down budget spending and anti-crisis measures after the oil price fall wiped out a third of projected revenues, Finance Minister Alexei Kudrin told Reuters on Monday.
In January, Prime Minister Vladimir Putin ordered the Finance Ministry to revise the budget to take into account the projected average oil price of $41 per barrel, well below the $95 per barrel used in initial calculations.
Since then a number of officials, including anti-crisis coordinator First Deputy Prime Minister Igor Shuvalov, said the new budget will be ready within days but Kudrin said he still needed two or three more weeks to finish the job.
"A difficult, scrupulous work is under way, it requires some time," Kudrin said on the sidelines of the G8 finance ministers meeting in Rome.
He said in an interview with Russia’s Rossiya television that inflation in Russia could reach 14% in 2009 due to increased borrowing from its reserve funds to cover the budget deficit.

â€œWe are expecting inflation to reach 13%-14% due to a more extensive use of reserve funds to cover the budget deficit," he added.

He added that the government would increase borrowing in the next two years to partially cover the budget deficit, but would not cut the spending for social programs approved for 2009.

The minister earlier said Russia’s GDP growth will be close to zero and budgetary revenues could decline 40% in 2009 amid the economic crisis.