Russia to cut budget spending 10% as oil price seen falling further

MOSCOW, Jan 13 (PRIME) -- The Russian government will reduce budget spending by 10% in 2016, Finance Minister Anton Siluanov said at a forum on Wednesday, confirming earlier media reports.

“We have to take weighted measures now, regarding how to bring the budget in line with the new realms. I want to tell you that such decisions have already been made in the government,” he said.

“The first step – we have agreed that now, ministries and authorities – after receiving their corresponding subventions for 2016 – will choose the priorities in these subventions and will … choose themselves the most efficient spending and cuts of inefficient spending. And they will present proposals to the Finance Ministry to optimize budget spending by 10% for key ‘not reserved’ items.”

According to earlier reports, the government will have to complete their proposals by Friday.

The current 2016 budget spending plan stands at 16.099 trillion rubles, which will make for a 3% of the gross domestic product (GDP) deficit. This plan was based on an oil price forecast of U.S. $50 per barrel.

Oil prices will continue falling, Siluanov said. “Now there is a very tough balancing of the oil market. We see that nobody is reducing production of this oil and we will soon most probably see a further price decrease for this product,” Siluanov said.

The state sector of the Russian economy and budget have not adapted to the new oil prices so far, Siluanov said. “We have to make a wide range of decisions to change the budgetary policy.”

The minister also said that state companies must reduce their spending in the same way that the government does.

(76.6041 rubles – U.S. $1)

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