#13 - JRL 7285
Russia '04 budget seen realistic, eyes on spending
MOSCOW, Aug 11 (Reuters) - Russia's Finance Ministry has come up with a hard
headed budget plan for 2004 but generous spending ahead of a December
parliamentary election could make it vulnerable to external shocks, economists
said on
Monday.
"On the good side it is still a fiscally prudent budget as having a
fiscal
surplus is appropriate in this situation," said Christof Ruehl, a chief
economist of the World Bank in Moscow.
"On the bad side it seems that the share of expenditure is not frozen
but
going up slightly."
On Saturday the finance ministry submitted its draft 2004 federal budget to
the cabinet. The draft is aiming for a budget surplus of 83.4 billion roubles,
or 0.5 percent of GDP.
Originally it wanted a budget surplus of 95 billion roubles for next year but
last week agreed to allocate an extra 30 billion roubles to the regions and
the military to appease lawmakers.
According to the draft, Russia's non-interest spending is set to rise to 1.93
trillion roubles in 2004 from 1.76 trillion expected this year although its
share in relation to GDP was due to fall to 12.6 percent from 13 percent in
2003.
"It is a rather realistic budget but they should work harder in
rationalising
the structure of spending," said Yulia Tseplayeva, an analyst at ING Bank
in
Moscow.
SURPLUS TO CUSHION ANY REVENUE SHORTFALL
She said that failure to rationalise inefficient spending would increase the
vulnerability of the budget but she praised the government for pursuing a
surplus which should help to cushion any revenue shortfall.
"The budget has to be planned with a surplus to make sure that it would
end
at least in balance in the worst case," Tseplayeva said.
The 2004 draft is based on a forecast that the economy will grow 5.2 percent.
The government expects growth of 5.9 percent this year, thanks to high global
crude and commodities prices, rising investment and robust domestic demand.
Peter Westin, a chief economist at Aton Capital, said the main improvement in
Russia's 2004 budget would be introduction of a stabilisation fund designed
to bridge revenue gaps in the event of a plunge in prices of crude, Russia's
key export.
"If they manage to build up enough reserves, which they seem to be
doing,
this would be a major fiscal mechanism for coming years," Westin said,
noting it
was key for Russia to have strict rules on how the cash could be used.
The government wants to set aside windfall oil revenues exceeding $20 per
barrel in a fund which at current prices should generate some $23 billion in
three to four years.
Russia would also channel its budget surplus into the fund, according to the
plan.
The cabinet is expected to discuss the bill on August 14 before sending it to
parliament. The government wants the parliament to pass the budget by the end
of November.
Aug. 12, 2003:
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