MOSCOW, September 12 (RIA Novosti) – Russia will cut planned budget expenditure by at least 5 percent between 2014 and 2016, Prime Minister Dmitry Medvedev said Thursday.
“We are forced to reduce expenditure from the state budget by no less than 5 percent in all areas, apart from ring-fenced areas, and in some areas this reduction could be bigger,” Medvedev told a government meeting, the Prime news agency reported.
The belt-tightening comes as the government is formulating the main parameters for its spending plans between 2014 and 2016 against a background of slowing economic growth and contracting investment – despite consistently high energy prices and a global economy that is apparently emerging from a long period of crisis.
After recording a balanced budget last year, Russia is set to record a deficit of about 520 billion rubles ($15.9 billion) this year.
Economic Development Minister Alexei Ulyukayev said budget cuts could be even more severe. During the same meeting Thursday he said such cuts could be up to 10 percent, Prime reported.
Social expenditure, salaries for officials and Russia’s external financial commitments are the main areas of expenditure that are ring-fenced from the cuts under discussion.
At the end of August, the Economic Development Ministry reduced its 2013 growth forecast from 2.4 percent to 1.8 percent, its 2014 growth forecast from 3.7 percent to 2.8-3.2 percent, and its 2015 growth forecast from 4.1 percent to 3.2-3.4 percent. The Russian economy slowed to 3.4 percent growth last year from 4.3 percent in 2011.
“We must soberly assess the situation and alter incomes and expenditures in accordance with the forecasts of economic growth that are currently being made,” President Vladimir Putin told a government meeting to discuss the budget Wednesday, according to a transcript on the Kremlin website.