Budget Figures Hint At Looming Deficit

Russia's budget surplus narrowed in December after an end-of-year spending increase, evidence that the government is heading for its first deficit in a decade this year.

The surplus narrowed to 1.7 trillion rubles ($51 billion), or 4 percent of gross domestic product, from 2.48 trillion rubles, or 6.3 percent of GDP, in November, the Finance Ministry said Tuesday in a preliminary statement.

Spending rose to 1.4 trillion rubles from 843 billion rubles. Revenue rose 4 percent to 595 billion rubles.

"Spending traditionally goes up at the end of the year," said Vladimir Tikhomirov, chief economist at UralSib, before the release. This year, "some of the investment projects, some of the long-term federal programs could easily be postponed. On the fiscal side, it would allow the government to avoid spending most of its reserves," he said.

Prime Minister Vladimir Putin called on Monday for this year's budget to be revised because of the global slowdown and falling oil prices as the government faces its biggest economic challenge in 10 years. The previous budget was based on an average price of $95 per barrel. The Economic Development Ministry now forecasts $41 a barrel.

"In 2009, we can allow a relatively big budget deficit because we have funds we will be putting to use," Finance Minister Alexei Kudrin told reporters in Beijing on Tuesday. "In 2010 and 2011, we'll decrease the budget deficit appropriately."

Russia may have a 4 trillion ruble deficit this year if the price of Urals crude averages $32 a barrel, Interfax reported last week, citing unidentified people who referred to Finance Ministry calculations.

Russia's $225.1 billion sovereign wealth funds are finding it harder to invest abroad as the global economic collapse undermines assets, Kudrin said.

"There has been no opposition to Chinese or Russian sovereign wealth funds since the beginning of the financial crisis," Kudrin said. "The problem now is on the other end; the investment targets aren't very successful."

The Reserve Fund and National Welfare Fund rose to a combined record of $225.1 billion in December. A portion of these oil funds, included in the total value of Russia's international reserves, is invested in bonds issued by U.S. mortgage agencies.

Presidential economic adviser Arkady Dvorkovich has said the government will need to tap the fund to cover this year's deficit and may borrow abroad to make up the difference.

"This is a viable option because Russian public debt is quite low," Tikhomirov said. "Despite the recent downgrade, there will be few concerns that Russia can't meet its debt obligations."

Standard & Poor's cut Russia's credit rating last month amid concern about the rate of reserves depletion.

Revenue in the year totaled 9.3 trillion rubles, 3.3 percent more than the original full-year plan, the ministry said. Spending was 97.7 percent of the plan.