Russia must cut expenditure to cover what could be a more than $US45 billion drop in revenues this year if the average oil price is $US50 a barrel, Finance Minister Anton Siluanov said on Wednesday.
In comments underlining the government’s concern at the depth of an economic downturn, he told a conference that all budget expenditure should be cut by 10 per cent except on defence, a priority for President Vladimir Putin.
With the rouble in decline, the oil price low and the economy hit by Western sanctions over the Ukraine crisis, Siluanov said overall expenditure in 2015 must increase by only 5 per cent rather than the 11.7 per cent previously budgeted.
“Regardless of having already curbed 2015 spending, we will ask parliament to cut by 10 per cent all expenditure apart from defence spending. This is the decision we have made,” he told the Gaidar Forum, a conference grouping government officials, economists and business leaders.
He said Russia needed to boost its reserves to overcome many of its difficulties as the price of oil looked set to continue at low levels. The rouble, which fell about 40 per cent against the dollar in 2014, has also continued its decline this year.
“We think that with the (average) oil price at $US50 per barrel (in 2015) … we will lose some 3 trillion roubles ($US45 billion USD) in revenues,” he said.
Energy is Russia’s main export and proceeds from the energy sector make up around half federal budget revenue.
Siluanov said the reserve fund, a rainy day fund to cover any budget holes, would be increased by 370 billion roubles and he said Russia could invest in high-yielding rouble accounts.
“We need to have a lot more resources so as not to spend, not to burn up the reserve funds,” he said.
($US1 = 65.7300 roubles)
(Additional reporting by Oksana Kobzeva, Jason Bush, Katya Golubkova, Gabriela Baczynska and Elena Fabrichnaya, Writing by Elizabeth Piper, Editing by Timothy Heritage)
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