PROHIBITIVE AMBITIONS

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THE REGIME WILL KEEP INFLATING THE BUDGET SO AS TO KEEP ITS OWN RATING HIGH

The authorities make an emphasis on fulfillment of social obligations.


Cabinet meeting yesterday was momentous indeed. The government discussed the amended 2009 budget and the anti-crisis action plan. The figures Putin was using showed gravity of the situation on the one hand and resolve of the government to tackle the crisis and its social consequences on the other. The resolve is strong. The government will fight the crisis and its consequences whatever the cost and the cost will be high. To a considerable extent, it is the price Russia has to pay for the prime minister’s political ambitions.

Budget revenues were planned at 6.7 trillion, costs at 9.7 trillion, and deficit at 3 trillion rubles (7.4% of the GDP). Putin told the government with undisguised pride that budget costs in the latest variant of the document had been upped by 667 billion rubles. Funding of all key spheres and programs (demographic, educational, health care, pensions, innovation development) would be spared sequestering, he said. “They are our priorities,” Putin explained. “These expenses are not to be revised.”

The decision to up social spendings was mentioned as one of the Cabinet’s accomplishments. The basic part of the pension will increase 31.4% rather than 25% as of December 1, 2009. In absolute figures, however, the increase is a laugh. Basic part of the pension will be but 102 rubles higher than initially planned which is nothing to boast of considering the rise of prices and tariffs. In any event, nobody wanted to dwell on these nuances.

Putin meanwhile announced that the crisis was going to last and that hefty oil export revenues were a thing of the past, at least for the time being and for some years to come. Reserves will be used to cover the budget deficit. Once they are expended, the state will borrow money on free market terms. (Putin promised to do without new banknotes printing and borrowing abroad.)

Independent experts say that the increase of budget costs in the crisis is of paramount importance for Putin. Objectively at least, it is proof of his efficiency as the premier. Hence the prime minister’s emphasized attention to unconditional fulfillment of social obligations many of them he himself initiated. Also importantly, years of high oil and raw material prices and their effect on the Russian budget are associated in Russian mentality with Putin’s name.

Political Techniques Center Vice President Aleksei Makarkin commented that the authorities refuse to even entertain the idea of reneging on social commitments – unlike that of sequestering other costs. “The powers-that-be know that the population will immediately recall the 1990s, the period of grave difficulties for the economy and social sphere,” Makarkin said. The expert added that the corrected 2009 budget upped subsidies to the regions in need of finances to pour into the social sphere. “The federal center cannot help giving the regions this money. That’s instinct of self-preservation kicking in. What I’m saying is that the authorities are going out of their way to retain stability in the country.”

Yevgeny Gavrilenkov of Troika Kapital called the increase of budget costs from 7.6 trillion rubles in 2008 to 9.7 trillion in 2009 considerable. “Unfortunately, not all of these costs will benefit economy. Some costs could be cut and that would have curbed inflation some,” Gavrilenkov said. According to the specialist, inflation rate is the Russian regime’s number one problem nowadays. “Should the budget pour into the Russian economy more finances than it could digest, all surplus rubles will be converted into dollars. It will aid American economy rather than Russian,” Gavrilenkov warned.

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