Russian Plan to Combat the Crisis Revealed

Russian newspapers reported that the crisis combat plan includes assistance to regions, support for key economic sectors such as agriculture and the automotive sector, as well as social policy measures and structural reforms.

Russian Minister of Economy Alexei Ulyukayev announced on Thursday that he will set aside nine billion euros to combat the financial crisis caused by the sharp drop in oil prices on global markets. The minister plans to allocate 750 billion rubles (nine billion euros) for crisis mitigation measures, of which 310 billion rubles will be loans to regional administrative bodies, already foreseen in this year’s budget.

The Russian economy shrank by 3.7 percent last year and is expected to suffer the consequences of structural problems exacerbated by the sharp drop in oil prices on international markets and Western sanctions due to Russia’s involvement in conflicts in Ukraine.

Russian President Vladimir Putin has ordered that the budget deficit must remain below three percent of GDP. The current budget is based on an assumed oil price of 50 dollars per barrel, so achieving it will be a very demanding task if prices do not return to previous levels. Currently, oil is trading at around 30 dollars per barrel.

From Ulyukayev’s statements, it was unclear how the government intends to raise the planned funds for combating the crisis. Russia has two cash funds for ‘rainy days,’ but they have already been deeply tapped, among other things, in efforts to support the ruble’s exchange rate, and some officials have stated that they could be completely depleted by the end of the year.

Russian newspapers reported that the crisis combat plan includes assistance to regions, support for key economic sectors such as agriculture and the automotive sector, as well as social policy measures and structural reforms.

Although the government announced that it intends to reduce spending by 10 percent this year, some large sectors are protected from cuts, particularly defense and the social welfare system such as pensions.

Additionally, parliamentary elections are expected to be held in September, so the government wants to preempt any potential dissatisfaction among citizens regarding the difficult economic situation, notes the AFP agency.