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22 Sep, 2006 08:08

State Duma to adopt new budget

State Duma to adopt new budget

It's a busy day for the Russian Duma as it debates the country’s draft federal budget for next year. The new budget is aimed to increase government spending on social services, and will also give substantial support to the country’s small businesses.

The new budget also considers other areas of national economy, such as defense, national security, education and healthcare and culture will also receive substantial financial increase.  Economy will grow by 172 billion rubles (more than six billion dollars). Extra budget funds by 163 billion, and defense – by 161 billion rubles. Targeted federal financing will go to revive ailing industries and infrastructure.

Wages for public workers will rise by 15 percent and pensions by 20 percent.

Evgeny Gavrilenkov, Chief Economist, Managing Director Troika Dialog, who was in our studio, said “Economy keep growing 6-7 percent a year. And next year roughly the same rate of growth should be expected. So real incomes may grow a bit faster. In real terms , of course, if you tend to raise expenditures and pensions by a quarter in nominal terms it does mean in real terms they will grow that fast.

The new budget will grow as revenues are set to reach almost 7 trillion rubles or billion dollars. Inflation is estimated at six and half.  Revenues from oil prices – 61 dollars a barrel – will be invested into the Stabilization Fund. Next year is pre election year and the end of the year we have Duma elections. And usually during those periods we have very populist policy. To some extent it will happen next year. ”

The government does not plan to inject extra money into Russia’s economy as that could increase inflation.

Fighting inflation and lowering interest rates is the best way to revive industry.

Valery Draganov, Head of the Duma committee on economic policy entrepreneurship and tourism says: “The aim is to curb inflation and then keep it on the level of no more than 2 percent.”

The draft budget seems to have good prospect of being adopted by the State Duma in the first reading perhaps with some alterations.

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