The Russian government has agreed to set aside 500 billion rubles ($15.4 billion) in next year's budget to directly finance anti-crisis measures if the eurozone crisis continues to escalate and spread, Finance Minister Anton Siluanov said on Tuesday.
The funds will be used to support 'socially needy peopleÓ and 'systemically important enterprises,Ó Siluanov said in an interview with The Financial Times.
In his first interview with a foreign newspaper since his appointment as Russia's finance minister last year, Siluanov said the anti-crisis mechanism also envisaged the revival of a scheme, proposed but not implemented in 2009, to issue government bonds to recapitalize banks in exchange for shares.
'We believe that the decision to divide the budget expenditures by order of importance is a serious step in facing the global instability,Ó Alfa Bank's analysts say. 'Furthermore, the decision suggests that the Russian Cabinet is concerned about the increased budget vulnerability to oil prices and is ready to act to minimize economic risks. The 1.5-3% of GDP in expenditures suggested by Shuvalov is a very ambitious figure, representing around 15% of next year's budget expenditures, but even a smaller amount would be a positive signal for the market.Ó
'That said, we view this news with some caution as implementation is usually a harder task than formulating a proposal. First, the proposal comes amid the Saint Petersburg Economic Forum, and delivering an unexpected message promising better economic efficiency can be a way to impress foreign investors. Secondly, the discussed proposals have yet to be introduced into next year's budget draft, and as some military expenditures were included in the waiting list, this may provoke resistance from Prime Minister Dmitry Medvedev, as he initiated the military spending boost. Finally, in his recent Financial Times interview, Siluanov discussed a RUB500bn package that will be provisioned to stimulate the economy in the event of a crisis. This may mean that the Cabinet will just replace a portion of the expenditures with other items. However, despite all this uncertainty, we definitely welcome the focus on budget efficiency, and regardless of the risks of implementation, the proposal confirms our view that the Cabinet will favor budget stability as a policy rule,Ó experts add.
The Russian government has set aside 200 billion rubles for anti-crisis support to domestic companies in 2012.