Cbanker: Spending growth curbs only way to cut Russian deficit

MOSCOW, Aug 24 (PRIME) -- The only way to reduce Russia’s budget deficit is to cap spending increase, a spokesperson at the central bank told PRIME on Wednesday.

“Budgeting in the current economic conditions, including when taking in consideration the unfavorable external trends and further falls of energy income, remains quite a difficult task,” the spokesperson said.

“Not only this year’s budget fulfillment is important, but also the development of budget policies in future. If there are no serious changes in the external environment, the only way of reducing budget deficit is a sensible limiting of budget spending growth.”

Russia’s federal budget deficit amounted to over 1.5 trillion rubles in January–June, or 4% of the country’s gross domestic product (GDP) and Prime Minister Dmitry Medvedev said that the deficit may exceed a 3% plan in 2016.

Central Bank Chairwoman Elvira Nabiullina has said that high inflationary expectations are in part fueled by budget policies. The central bank has calculated that a one percentage point growth in budget deficit should lead to a one percentage growth of the key rate.

(64.7684 rubles – U.S. $1)

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