UPDATE 3: Russia to cut budget spending 10% as oil price seen falling further
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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.”
Siluanov said that budget adjustment proposals must be ready by April.
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.
The Finance Ministry offers to axe budget investment by about 500 billion rubles, Siluanov said.
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.
DEFICIT INCREASE
Economic Development Minister Alexei Ulyukayev said that the government is considering raising budget deficit to 7–7.5% of GDP this year. “If extremely low oil prices persist, we consider an option when budget deficit can rise to 7–7.5% of the GDP.”
The government will meet all social obligations and the 10% cut will not affect them, the minister said.
“I think that the situation will be quite stable. This means that the obligations will be fulfilled, social and state obligations, in the area of wages and of pensions. We rely on a gradual inflation decrease, which is very important both for wallets and for consumer baskets of our citizens,” the minister said.
Siluanov said that social liabilities are not subject to adjustments.
Ulyukayev said that the Russian economy and the social system have adapted to market volatility.
He also said that chances of the ruble strengthening or weakening are equal.
(76.6041 rubles – U.S. $1)
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