MOSCOW (Reuters) - The regulations governing budget spending in Russia, where the economy is slipping into recession due to low oil prices and the coronavirus pandemic, are hindering its ability to adequately fund anti-crisis measures, economists have said.
Russia overtook mainland China on Monday in terms of its number of confirmed new coronavirus cases, with a national tally exceeding 87,000.
As it battles the virus, its energy-dependent economy could contract up to 8% in the second quarter, the central bank has said.
Russia has earmarked 2.8% of its gross domestic product, or about $40 billion (32.25 billion pounds), to fight the virus and its economic impact, a fraction of the $250 billion it spent to counter the effects of the 2008 global financial crisis.
But under its own budget spending rules, Russia can only use the National Wealth Fund, a rainy day fund made up of oil and gas revenues, to compensate for a shortfall in these revenues. The wealth fund contained 12.86 trillion roubles, or around 11.3% of GDP, as of this month.
Russia also heavily regulates the maximum amount it can spend from its national budget, a policy for which Moscow has been praised by some of the world’s top economists.
President Vladimir Putin now faces growing discontent because of the struggling economy, with his approval rating at its lowest level since 2013, according to the Levada pollster.
Former finance minister Alexei Kudrin, who now heads the country’s audit chamber, has called for Russia to make an exception and spend at least half of the fund this year to support the economy.
“The government is suggesting these funds be spent over time, over a period of at least three years,” Kudrin, who was the mastermind behind the fund’s creation in 2008, told Russian state television.
“In my conversation with the president, I told him it would not be the time to skimp when the peak (of the coronavirus outbreak) hits this year.”
Other economists have called for Russia to loosen its budget spending restrictions to use its vast reserves in times of crisis.
Analysts from the Center for Macroeconomic Analysis and Short-term Forecasting, a Moscow-based think tank, said the wealth fund and Russia’s low public debt were resources that could be used to buttress the economy.
“Without the softening or temporary suspension of the budget regulations, carrying out a large-scale anti-crisis policy will be impossible,” it said.
Experts from the Russian Presidential Academy of National Economy and Public Administration have called for restrictions to be softened this year and suspended next year, when the economy is expected to start recovering.
Some other analysts have also called for a portion of the liquid part of the wealth fund, which accounts for around 9.8% of GDP, to be spent to support the economy.
The finance ministry, which has observed a strict fiscal policy in recent years, has yet to respond to calls for softer budgetary restrictions.
Writing by Gabrielle Tétrault-Farber; Editing by Katya Golubkova and Hugh Lawson