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. Last Updated: 07/27/2016

Budget Surplus Hits 1.4% of GDP

Russia ended 2002 with a higher-than-expected budget surplus of 154.3 billion rubles ($4.84 billion), representing 1.4 percent of gross domestic product, a Finance Ministry official said Friday.

Last month the ministry was forecasting a surplus of 1 percent of GDP, having scaled back its original target of 1.6 percent of GDP. The ministry spokesman also said the primary surplus, which excludes foreign debt servicing, was 377.9 billion rubles, or 3.5 percent of GDP, in 2002.

The higher-than-expected surplus will help cushion the oil-dependent economy against a decline in oil prices in 2003, when its foreign debt payments peak, economists said.

"Higher oil prices in the second half of the year contributed to higher revenues, but the major reason was the cut in spending not related to debt repayments," said Anton Stroutchenevski, an analyst at Troika Dialog.

According to the ministry's preliminary data, budget revenues last year came to 2.2 trillion rubles, beating its revised 2003 target by 2.6 percent, while spending was 2.04 trillion rubles, 3.12 percent short of its adjusted plan.

"The increase in the surplus means that the federal reserve fund will be higher than was initially planned. According to our estimates, it will be least 250 billion rubles," Stroutchenevski said, adding the boost would come from unused funds from budget-financed organizations.

Russia has been setting aside part of its budget surplus and privatization proceeds for a special reserve fund, designed to smooth over the country's foreign debt repayment peak of about $17 billion in 2003.

The ministry had said the fund had 197 billion rubles at the end of last year, in line with its initial target. But its estimate did not take into account about $2.6 billion in proceeds from the sale of state-owned stakes in oil firms Slavneft and LUKoil that should reach the fund in 2003.

David Ross, an analyst at London-based economic consultancy 4cast, said Russia, the world's second-largest oil exporter, could have about $8 billion in the fund to cushion volatile global oil prices.

"The fact that they were successful in selling those two oil firms has offered a bit of a hedge against falling oil prices this year, if we see the war in Iraq concluded and oil prices come down on the back of that," Ross said.

The 2003 budget contains a pessimistic estimate that the price for Urals oil export blend will average $18.50 per barrel with optimistic estimate set at $21.50. Every dollar fall in the price of a barrel of oil lops $1 billion off revenues over the course of a year.

The 2003 budget stipulates a surplus of 72.15 billion rubles, or 0.6 percent of GDP, and the government recently said it would raise that to 1.5 percent and 1.7 percent in 2004 and 2005, respectively, to maintain financial stability.