The Cabinet approved a draft 2010 budget Wednesday after Prime Minister Vladimir Putin stressed that it would severely cut spending on government offices and offer ballooning payouts to retirees.
“Spending on running ministries and other government offices is being reduced more than it has ever been reduced, I think, in all recent history,” Putin said in his opening remarks to the Cabinet session.
That said, the cut will be of paltry dimensions, 18 billion rubles ($600 million), compared with overall budget spending that is projected to reach 9.89 trillion rubles ($330 billion).
Officials ranging from the president to ministers and lawmakers will have to spend 20 percent less on maintenance of their cars, cell phone bills and office renovations, Finance Minister Alexei Kudrin told reporters after the Cabinet session.
Putin once again stressed a record 46 percent increase in spending on pensions next year, which will take 4.4 trillion rubles from the federal budget and the Pension Fund.
“This will be 10 percent of the national gross domestic product, which is an absolutely unprecedented figure,” Putin said in the opening remarks. “There has been nothing like this in the history of this country.”
The budget — with revenues of 6.95 trillion rubles and a deficit of 6.8 percent of GDP — has to be approved by the State Duma and signed by the president to become law.
Putin cautioned ministers against relaxing as news of a nascent economic recovery trickle in from countries around the world, including Russia.
“I want to say it again today: We can’t afford unjustified optimism,” he said.
Anti-crisis measures will continue into the next year, including financing to support exports and state guarantees on corporate loans, Putin said.
Other steps to pull the economy out of the crisis will include a potential exchange of government bonds worth up to 250 billion rubles for preferred shares in banks. That would enable lenders to borrow from the Central Bank by pledging the bonds as collateral. A reserve of 70 billion rubles has been set aside for economic contingencies.
By earmarking 1.6 trillion rubles for building roads, bridges and support of high-tech industries, the government wants to continue modernizing the economy, Putin said. He didn’t say whether the funding would be higher than this year’s, but a Cabinet source said Tuesday that spending on the national economy would shrink next year.
The modernization money will include 10.8 billion rubles for a new state program to develop digital radio and television broadcasting starting next year, Putin said.
On top of higher pensions, there will be other additional social expenses next year. The budget will start paying out so-called maternity capital to families that had a second baby in 2006 when Putin initiated a program to encourage births. Under the program, the government deposits more than 200,000 rubles on behalf of the family once the baby is born, allowing it to draw the money three years later. An estimated 300,000 families will receive 102 billion rubles next year, Putin said.
The government will again increase spending on buying apartments for military officers, to 81 billion rubles next year from 50 billion rubles this year, Putin said.
Next year’s budget is heavily tilted in favor of current spending, such as anti-crisis measures and pensions, to the detriment of longer-term investment, said Alexander Morozov, chief economist at HSBC.
“The potential for reducing investment spending any further has been exhausted,” he said.