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Prime Minister Vladimir Putin chaired a Cabinet meeting

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Vladimir Putin's opening remarks:

Good afternoon,

We have very important issues on our agenda today. We are going to look at the results of the country's development over the first six months of 2008; we will consider draft laws on the federal budget, the Pension Fund budget, social insurance and medical funds, and major trends in monetary and credit policy for the next three years.

Russian economy is an inseparable part of the world economy. We have discussed this on a number of occasions and we all know this. Everything that happens in world finance and world economy reflects on us one way or another. Unfortunately there are plenty of negative signs from international markets. There is a tangible growth retardation of the world economy and significant fluctuation of prices on raw commodities. I've talked about it more than once that in such conditions we should act very carefully, and should be ready for any course of events, including a negative one.

What exactly have we done here, in the Russian Federation by the end of six months? On the whole our results have not been bad. I would even say they have been good with the exception of some inflation tendencies; I'll expand on it further. But on the whole we have not done badly at all.

GDP growth was 8% in the first six months of this year. Investment increased by 16.9%. Constant growth of both wages (13%) and real incomes (8.1%) has become a tendency.

Unfortunately, as I have already mentioned, rates of inflation remain unacceptably high: by the middle of August prices increased by 9.5%. We have discussed this many times and we all agree that in this regard the budgetary policy must be active. It's necessary to use all means possible to implement a budget manoeuvre - to develop a national innovative system and to increase investments in education, public healthcare, and infrastructure, as well as in the defence and security of Russian citizens.

The draft federal budget has set a target of decreasing inflation to a one-digit number in 2009. That is one of the key indicators. I'd like to ask all the departments to consider this view of the situation.

In 2009, total expenses of the federal budget will exceed 9 trillion roubles. In particular, over 1 trillion roubles will go to finance new priority projects, or for increasing the financing of major social obligations of special importance, such as the indexation of wages, pensions and allowances.

All together for the next three years we're planning a gradual, but significant increase of incomes and, correspondingly, the expenditures of the federal budget. In 2009 the income will be 10.9 trillion roubles, the expenditures - 9 trillion roubles, the surplus - 1.9 trillion roubles; in 2010 income will be 11.7 trillion roubles, the expenditures - 10.3 trillion roubles, the surplus - 1.4 trillion roubles; in 2011 the income will be 12.8 trillion roubles, the expenditures - 11.3 trillion roubles, and the surplus - 1.5 trillion roubles.

I'd like to draw your attention to the fact that we do have a surplus. And we must use this opportunity as long as possible when we make up the budget of the country with the surplus. And I want to ask you not to encroach on it if we want to stay within planned inflation borders. Because otherwise all these expenditures will turn negative both for the economy and for individual citizens.

In 2009 we will reach the goal of increasing social pensions to the level of the living wage. The average pension will increase. Veterans of the Great Patriotic War who require housing will be provided with it. 18.9 billion roubles has been allocated for that. The President has mentioned it during his electoral campaign, he gave promises and we have to carry them out.

114 billion roubles has been allocated for the reform on increasing public employees' salaries through the increase of salary funds by 30%. I'd like to remind you once again that with the increase of the funds, salaries will go up just by the same rate, more or less. We're talking about the increase of salary funds. I'd like to emphasise once again that it undoubtedly will lead to salary increases, in the literal sense of the word.

Let me quote you some figures. The financing of education in 2009 will be increased by 26% to 423 billion roubles. Public health expenditures from the federal budget and the budget of the mandatory health insurance fund will increase by 35% to 485 billion roubles. 362 billion roubles, 38% up, will be allocated for the programme of transport system modernisation.

We'll start financing new target programmes, which will require 5.9 billion roubles for fire safety, 3.5 billion roubles for the modernisation of air traffic systems, and 9.6 billion roubles for education of young scientists. A number of other projects will also be financed.

Additional financial incentives for servicemen on combat duty will be paid starting next year. That means those servicemen who are staying, in every sense of the word, in the front lines of the most dangerous work, which includes aviation, Strategic Missile Forces and submariners. The sum of 25 billion roubles will be allocated for these aims. I think that should start the reforming of monetary allowance of the servicemen with the chances of promotion.

Subsidising of air flights for the residents of the Far East and Extreme North has been initiated: 1.7 billion roubles is allocated for these purposes. Residents of the Far East have raised this question long ago.

We have discussed the draft budget more than once and today we must approve it to forward it to the State Duma.

I ask the members of the Cabinet to bear in mind that all arguments must end here. There must be no branch lobbying in Parliament. The work with members of the State Duma should be focused on defending the position of corresponding ministries and the Government.

Our major task now is not only to justify the draft budget during debates in Parliament, but also to prepare by-laws necessary for the execution of the budget in time. I ask you to pay special attention to this matter. We must not allow failures in budget financing.

Let's switch to the discussion of the agenda. The Minister of Economic Development, please.