Russian finance minister urges budget austerity

12:45, January 23, 2010      

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One of the priority tasks facing the Russian government in the coming years is to guarantee the budget deficit not to exceed one percent of gross domestic product (GDP), said Russian Finance Minister Alexei Kudrin here Friday.

"We do not have the scope to increase spending," said Kudrin at the international conference "Russia and Global World: New Decade Challenges."

Future federal budget should also be set down with the oil price no higher than 60 U.S. dollars per barrel, in order to avoid the excess revenues from oil and gas sector, said the Deputy Prime Minister and Finance Minister.

"If not then the government should admit that it cannot fulfill any of the key tasks," said Kudrin as quoted by news agencies.

"Oil prices played a bitter role in the country's economy during the pre-crisis period," he said, admitting that the economic boom experienced by Russia during the past decade, which was on the back of high energy prices, was hardly repeatable.

The growth also exposed Russia to additional risks after the country was hit hard by the global economic downturn starting from 2008, he said.

During the next decade, percentage of oil and gas sector in the Russian GDP is expected to fall from the current 25 percent to around 14 percent, while a qualitative economic growth should be realized via development of innovative institutes and profitable macroeconomic parameters, said Kudrin.

To ensure a path of innovative development, Russia should continue to lower its crediting rate and seek to increase the available number of credits, he added.

"It is necessary to create in the country conditions that would be comfortable for the work of the financial institutes in this sphere," he stressed.

Russia, whose economy is heavily dependent on energy resources, was hard hit by the global economic downturn as oil prices collapsed late 2008. Preliminary statistics showed a 8.7-percent of GDP decline in Russia in 2009, with the annual average oil price at 61.8 dollars per barrel.

Russian leaders have repeatedly urged the modernization of economy prompted by hi-tech industries and services, in order to help the economy get rid of energy dependence.

Source: Xinhua
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