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© RIA Novosti. Безносов Михаил

Nation sees first January deficit in 10 years

by Alina Lobzina at 16/02/2012 17:27

The Russian budget has seen its first January deficit in 10 years as an income increase failed to compensate for growing expenditures fueled by pre-election spending.

The deficit of 18 billion rubles, or 0.5 percent of monthly GDP, is partially due to increased spending on social payments, pensions and the military, which is to continue for at least a few months, according to a report submitted by Credit Suisse analysts.

“Four years ago [before the last election] they were actively engaged in national programs, and in today’s situation they need to win convincingly, and in the first round,” Igor Nikolayev, strategic analysis department head at FBK, told RBK business daily. “No one is going to economize on that”.


Expenditure growth outstrips revenues

Russia traditionally sees budget expenditures grow in December, since officials strive to use the remaining funds before the end of the year.

In January, budget expenditures grew by 0.6 percent compared to December and reached 21.1 percent of GDP, while income has shown a more modest growth from 21.2 to 21.5 percent of GDP, RBK wrote in its report.

Social payments in general have reached 12 percent of monthly GDP, while in January 2010 they were only 10 percent. Military expenses, which were 3.4 percent of monthly GDP on average in previous years, have jumped to nearly 6.3 percent.

A payment of 1.3 billion euros to Cyprus, as a part of a previously agreed loan of 2.5 billion euros, could also have taken its toll, the analysts suggested.


Room for savings

Inefficient distribution of funds within the budget has also to be taken into account by the analysts, and the Finance Ministry’s officials are reportedly considering reforming it distribution.

The consolidated budget has a larger potential for optimization, as initially proposed by experts in charge of Russia’s social and economic development strategy until 2020, or Strategiya 2020, Vedomosti reported.

Officials believe it’s possible to economize about 5.5-6.9 percent of the GDP, if spending on human resources is cut from 4 percent to 1.7. The main cuts are to affect pensioners and military servicemen. 

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