Russia's finance minister calls for cut in planned spendingJanuary 14, 2015 - 17:57 AMT PanARMENIAN.Net - Russia's finance minister called on Wednesday, Jan 14, for a cut in planned spending to weather an economic crisis, warning of a more than $45 billion drop in revenues this year if the average oil price is $50 a barrel, Reuters reports. Anton Siluanov said all budget expenditure should be cut by 10 percent except defense, a priority for President Vladimir Putin. Adding to the gloom, Economy Minister Alexei Ulyukayev said there was a "pretty high" chance Russia's credit rating would be downgraded to junk and a deputy, Alexei Vedev, said he expected inflation to peak at 15-17 percent in March/April. "The state cannot have the kind of spending it used to have with economic growth ... (and) with the oil price at $100 per barrel," Siluanov told a conference of state officials, economists and business chiefs. But with Russia being starved of investment, pressure is mounting for stronger government action to pull it out of crisis. "We need a radical turn in economic policy," said German Gref, the head of Russia's biggest bank, Sberbank, demanding a "breakthrough" to improve the dire investment climate, stymied by state pressure on business and weak rule of law. Ulyukayev also highlighted the problems facing small and medium businesses, saying they must be supported to try to spur Russia's oil-dependent economy, which the World Bank expects to contract by 2.9 percent this year. "The global economy will never again be what it used to be in 2000-07 and the situation in Russia will never be the same," Ulyukayev said, referring to the economic boom years under Putin when the global oil price soared. "It will be much more complicated. It already is much more." Russia's 2015 budget was based on an oil price of $100 a barrel but prices are now close to six-year lows at just above $46 a barrel. "Regardless of having already curbed 2015 spending, we will ask parliament to cut by 10 percent all expenditure apart from defense spending," Siluanov added, according to Reuters He said Russia needed to husband its reserves to overcome difficulties as the price of oil looked set to continue at low levels. The ruble, which fell about 40 percent against the dollar in 2014, has also continued its decline this year. "We think that with the (average) oil price at $50 per barrel (in 2015) ... we will lose some 3 trillion rubles in revenues," he said. Siluanov said the Reserve Fund, a rainy day fund of around $90 billion to cover budget holes, would be increased by 370 billion rubles ($5.60 billion) from last year's savings, but Russia would need to spend more than 500 billion rubles from it in 2015 to cover the budget gap. The 500 billion, currently invested in foreign currency assets, would be converted gradually on the forex market. Siluanov said the ministry could invest part of the Reserve Fund in ruble bank accounts to take advantage of the weak ruble and earn high interest. "We need to have a lot more resources so as not to spend, not to burn up the reserve funds," he said. Photo: RIA Top stories Yerevan has dismissed Turkey’s demand to shut down the Armenian nuclear power plant as “inappropriate”. Armenia will loan 2.9 billion drams to Nagorno Karabakh (Artsakh), according to a draft government decision. The Ministry of Ecology and Natural Resources of Azerbaijan has “strongly condemned” Armenia’s decision. Kerobyan has said that for the first time in the history of Armenia, the volume of foreign direct investments amounted to about $1 billion. Partner news | Scholz hopes Armenia-Azerbaijan peace treaty will be signed this year German Chancellor Olaf Scholz hopes that a peace treaty between Armenia and Azerbaijan will be signed this year. Ucom equips four bus stops in Ijevan with free Wi-Fi Ucom now provides free Wi-Fi coverage in smart bus stops in four communities of Ijevan. Armenians stage more campaigns against territorial concessions to Azerbaijan Protesters blocked more roads across Armenia on Friday, April 26 in continuing attempts to scuttle territorial concessions to Azerbaijan. Czech-Armenian military cooperation discussed in Yerevan A delegation led by the Director General for the Industrial Cooperation Division of the Ministry of Defence of the Czech Republic visited Armenia. |