Russia expects to balance budget by 2015

9 Jul 12
Russia will balance its budget by 2015 but must do more to reduce its reliance on oil and gas revenues, the country’s prime minister, Dmitry Medvedev, said on Friday.

By Nick Mann | 9 July 2012

Russia will balance its budget by 2015 but must do more to reduce its reliance on oil and gas revenues, the country’s prime minister, Dmitry Medvedev, said on Friday.

Federal government spending in 2013 is expected to total 13.4 trillion roubles, while revenues are expected to total 12.3trn roubles, giving Russia a budget deficit of 1.5% of gross domestic product.  Medvedev told Russia’s cabinet this would be balanced by 2015 if the domestic and global economic situations were favourable.

Last month, President Vladimir Putin set out plans for Russia’s government spending from 2013 onwards to be planned according to the average oil price over an increasing number of previous years, in a bid to reduce its high exposure to energy price fluctuations.

Medvedev said this new rule was a ‘serious financial instrument that will make it possible for us to minimise the dependence of the budget system on volatile hydrocarbon prices and maintain domestic stability’.

But he said more needed to be done to diversify Russia’s economy and also to address the country’s ‘rather high’ non-oil and gas budget deficit. The country’s deficit excluding energy revenues is expected to equal 10.1% of GDP in 2013, falling to 8.6% in 2015.

‘All this shows that Russia’s economic dependence on global energy prices continues, therefore the three-year budget priority remains the financial support for large-scale economic transformations and forming a new growth model,’ he said.

‘The ultimate objective of this model is to secure an adequate position for Russia on the international market not only as a supplier of energy and raw materials but also as the holder of intellectual property rights,’ he added.  

In particular, priority will be given to programmes for modernising the Russian economy, moving to hi-tech production and developing transport infrastructure, education and science.

‘The key condition here is comprehensive funding of competitive research and development,’ Medvedev said. ‘Budget allocations should be channelled for the development of Russia’s science potential and the creation of intellectual property.’ Funding of civil science is expected to total 320bn roubles next year.

‘Special attention’ would also be paid to changing the way the way the budget was delivered and how it interacted with state budget programmes and also to improve the ‘transparency and openness’ of the budget process.

Medvedev acknowledged that some experts had labelled the spending plans for 2013 ‘harsh’, but said it reflected an accurate assessment of revenues and how they could be distributed ‘efficiently’ taking into account the new rule on oil and gas revenues.

The government would fully meet its commitments in education, health and welfare, he said, as well as making social assistance ‘more targeted’ and strengthening support for families with children, the disabled and the pension system.

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