Report: Hit by oil price, Russia imposes 10% cuts on budget

MOSCOW, Jan 13 (PRIME) -- Under pressure from the falling global oil price, Russia is requiring government departments to cut spending by 10%, repeating a policy it also imposed in 2015, Reuters reported Wednesday, citing two government sources.

The cutbacks will exclude several areas of government spending, including public obligations such as pensions, and pay for government employees.

Energy giant Russia is under pressure to find spending cuts as the international oil price has plunged towards U.S. $30 per barrel, a major problem for the federal budget that relies on oil and gas taxes for almost half its revenues.

Under the plan, which was approved at a meeting chaired by Prime Minister Dmitry Medvedev in December, government departments have until Friday to submit proposals about where the cuts will fall, one of the sources said.

If they fail to do so the finance ministry will decide which items to cut.

The savings are expected to amount to 700 billion rubles.

Under the 2016 budget approved in October, federal budget expenditures were projected at 15.8 trillion rubles this year, up from 15.5 trillion rubles in 2015, with the federal budget deficit projected at 3% of gross domestic product (GDP).

However, that plan was based on the Urals oil price averaging $50 per barrel in 2016, an assumption that President Vladimir Putin has since described as "unrealistic".

A similar plan for government departments to cut their spending by 10% was also approved for 2015, but as with the latest plan large areas were excluded.

Government ministries eventually agreed to cut a trillion rubles from their expenditure plans in early 2015, but the introduction of new spending meant a revised budget approved in April cut overall spending only by 298 billion rubles.

(76.6041 rubles – U.S. $1)

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