MOSCOW (Reuters) - The Russian government on Thursday approved the country’s toughest budget since the global financial crisis to keep a tight control on spending as Western sanctions over the Ukraine crisis exacerbate an economic slowdown.
The 2015-2017 budget allows for tapping into the country’s reserves for the first time since the 2008 global crisis, while foreseeing an end to real wage growth, a struggle to tame inflation and a falling rouble.
It also relies on optimistic forecasts for oil prices at a time when borrowing abroad to cover any deficit slippage will be tough amid tightening Western sanctions.
Prime Minister Dmitry Medvedev told a government meeting on the budget that Russia would keep its debt low, ensure macroeconomic stability and fulfill social spending promises despite strains on the budget from Western sanctions.
“This is the first time when work on the federal budget, the three-year budget, took place in such difficult circumstances, when an economic slowdown was exacerbated by the implementation of sanctions on individual sectors of the economy, and when we needed to adjust an already tight budget,” Medvedev said.
“The main problem that we face today is the high level of uncertainty when it comes to how fast trust will return, how soon businesses become interested in investing, how the consumer market grows and what steps our partners will take,” he said.
Finance Minister Anton Siluanov told reporters he expected Russia’s budget deficit for the three-year period covered by the budget to total around 0.6 percent.
He said the government had decided not to impose a sales tax from next year to boost tax revenues and that the budget envisaged creating an anti-crisis reserve fund for next year of 190 billion rubles ($4.9 billion).
(1 US dollar = 38.4650 Russian rouble)
Reporting by Lidia Kelly; Writing by Alexander Winning; Editing by Gabriela Baczynska and Ralph Boulton