The Government is no longer able to work under the terms of the current Budget Code, which prescribes stringent limitations on using oil and gas revenues and on the budget deficit level. It has been decided to use the Reserve Fund to cover the deficit. Amendments to the Budget Code were discussed yesterday at the Government's meeting. "The current terms have served us well; the balanced budget policy has ensured macroeconomic stability and allowed us to completely resolve the foreign debt issue, which amounted to 150 billion roubles in January 2000," Prime Minister Putin said, praising the Cabinet's work during the last 9 years.
Finance Minister Alexei Kudrin, sitting next to Mr Putin, looked particularly proud at that moment. "Nevertheless, the budget legislation terms should reflect current economic conditions," Mr Putin said.
The Prime Minister admitted that there "will be a budget deficit in the coming years" and the Reserve Fund resources would need to be used to cover it.
"We are knowingly planning to use a considerable amount of existing reserves to fulfill the Government's social obligations in full, despite the decreased budget revenues, and to finance anti-crisis measures," Mr Putin said. "As previously mentioned on numerous occasions, there will be no spending reduction in the 2009 budget; on the contrary, a slight increase is required to finance anti-crisis measures..."
The amendments to the Budget Code are likely to be adopted at one of the next sessions of the State Duma. The Prime Minister specifically asked MPs to accelerate the process; the draft of the revised current year budget will be submitted to the Parliament by the end of March.
After the brief meeting, Finance Minister Alexei Kudrin shared some information with journalists that was immediately transformed into media headlines.
First, he said that the 3-year budget that was so enthusiastically promoted at the time of its adoption would be pushed back to 2010-2012, whereas the current budget will cover one year only. (Only recently, Mr Kudrin was a proponent of the three-year 2009-2011 budget).
Secondly, the Finance Minister said the price of oil in 2011 would average about $50 per barrel. And, finally, Mr Kudrin told reporters that Ukraine had requested a large loan from Moscow. "The Finance Ministry has received an official request from the Ukrainian Prime Minister Yulia Tymoshenko; a decision has thus far not been made on the request," the Minister said, adding that the amount of the requested loan was $5 billion.
Hopefully, they will be reasonable enough to refuse the request.