Kudrin Says Budget Revision Difficult

APKudrin meeting Italian Foreign Minister Franco Frattini in Rome on Monday.��
ROME -- The government faces a tough choice between scaling down budget spending and anti-crisis measures after the oil price fall wiped out a third of projected revenues, Finance Minister Alexei Kudrin said Monday.

In January, Prime Minister Vladimir Putin ordered the Finance Ministry to revise the budget to take into account the projected average oil price of $41 per barrel, well below the $95 per barrel used in initial calculations.

Since then, a number of officials, including anti-crisis coordinator First Deputy Prime Minister Igor Shuvalov, said the new budget will be ready within days, but Kudrin said he still needed two or three more weeks to finish the job.

"A difficult, scrupulous work is under way; it requires some time," Kudrin said on the sidelines of a G7 finance ministers meeting in Rome. "Whoever tells you the new budget parameters now, they will not be correct.

"The key decisions have not been taken yet. They will be taken in the nearest future."

Kudrin said the ministry's experts were weighing the pros and cons of increasing the scope of measures to soften the impact of the global financial crisis at the expense of other budget spending but vowed that pensions, public sector wages and unemployment benefits would not be cut.

"There is a question whether a new anti-crisis measure is better than an already existing budget-financed program," Kudrin said, adding that new construction projects -- such as hospitals and schools -- was an area where cuts could be made.

He said there was no final decision on the size of new anti-crisis measures, including the banking sector support.

He said the existing 325 billion ruble ($9.34 billion) package of subordinated loans for commercial banks, approved last year, would be increased by another 70 billion rubles.

VTB will get 200 billion rubles, but it is yet to be decided if the injection will take a form of a subordinated loan or a first-tier capital injection, Kudrin said.

Kudrin played down worries that Russian firms may have problems refinancing their foreign debt, as there was enough foreign currency inside Russia at acceptable interest rates. "It is no longer a serious problem for us. Our banks and corporations have prepared for debt redemption," Kudrin said.

Russia made a U-turn in its anti-crisis policy this month, announcing an end to a foreign debt refinancing program through state lender VEB after issuing several billion rubles to companies like RusAl and Rosneft.

"Why continue this program at the expense of our gold and forex reserves if this money is available in the market at affordable interest rates?" Kudrin said.

As a result of the gradual devaluation of the ruble, Kudrin said commercial banks held $80 billion in foreign currency in their accounts, including $30 billion in interest-free accounts at the Central Bank created to keep the currency in Russia.

Kudrin said the role of the state would rise during the crisis and it could take over assets used as collateral in loans from VEB if loans were not redeemed on time.

"De facto, these assets will become the state property. Large stakes in biggest companies," Kudrin said, adding that selling these assets when they go up in price could become a major source of government revenues in the future.