Moscow - Russia signalled on Monday it would overhaul its
2009 budget against the backdrop of plummeting oil prices, Russia's
main export commodity, and a forced devaluation of the rouble.
Russian Prime Minister Vladimir Putin on Monday ordered the finance
ministry to review the 2009 budget, based on an average price of oil
at 41 dollars per barrel.
'The Finance Ministry will have to introduce the necessary changes
to the current budget for 2009 based on an oil price of 41 dollars per
barrel,' Putin said during a televised government meeting.
The previous budget, which called for huge spending increases on
infrastructure projects, social programs and defence, was based on an
oil price of 95 dollars per barrel.
Putin's seemingly unshakable popularity has weakened as Russia's
economy absorbs the blows of the financial crisis.
Analysts also speculate that the economic slowdown could fuel a
split between Putin and his handpicked successor, President Dmitry
Medvedev.
Finance Minister Alexei Kudrin projected Monday that Russia's
economic growth could level off to between zero and 2 per cent this
year as Russia allowed the rouble to devalue against the dollars for
the sixth time this year.
The downturn is a huge blow to an economy that has grown at an
average of 7 per cent in recent years, fueled by soaring energy
prices.
Under Kudrin's conservative management, Russia locked oil windfalls
of over 200 billion dollars into a rainy-day fund, which it will use
to cushion the budget.
But Kudrin has warned that without a budget review the deficit
could reach 1 trillion roubles (36 billion dollars per year). Along
with government rescue measures, the deficit could dry up the reserve
fund in a matter of years.
Economy Minister Elvira Nabiullina said earlier on Monday that the
rouble will average 35.1 to the dollar this year if oil price remain
at 41 dollars per barrel.
But Kudrin, speaking at a financial forum in Hong Kong, made
bleaker forecasts, saying the price of oil could dip below 40 dollar s
per barrel. He added the country would see inflation hit 13 per cent
in 2009, up from 11.3 in 2008, amid the rouble slide.
As mass layoffs and salary cuts hit Russian cities, which have only
experienced growth over the past nine years, the Kremlin may look for
someone to take the blame.
Historically, this has been the prime minister. But many say Putin
has been scheming to return to the post he held for eight years in the
Kremlin - as the only man who can handle the job - should the
situation grow worse.
But Medvedev last week criticized the government, headed by his
political cohort Putin, for being too slow to adopt crisis-fighting
measures.
'Many things have been implemented unjustifiably slowly,' Itar-Tass
news agency quoted Medvedev as telling business leaders at a meeting
on the effects of the slowdown.
Medvedev won last March's election riding the coat-tails of Putin's
popularity after the latter endorsed him and said he would stand as
his prime minister, essentially presenting a duel ticket.
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