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. Last Updated: 07/27/2016

Kudrin Plans Tight Budgets in 2004-2006

Russia plans to draw up an austere three-year budget for 2004-06 based on an average price of $18.5 for a barrel of oil, the mainstay of the country's economy, Finance Minister Alexei Kudrin said on Wednesday.

Russia's 2003 budget is based on an average oil price of $21.5 a barrel.

"This means making budget policy more austere and cutting non-interest spending in the federal budget by about 1.4 percent of gross domestic product," Kudrin told a meeting of Finance Ministry officials.

The budget does not include repayment of debt principal.

Russia would aim to raise the value of a special stabilization fund to the equivalent of 8.7 percent of GDP to provide a cushion should oil prices fall sharply in the future, Kudrin said, adding that a fall in oil price to $12 per barrel would produce an annual budget shortfall of 2.9 percent of the GDP.

The government's reserve fund, set up to ease the pressure of this year's $17.3 billion debt hump, currently stands at 205.9 billion rubles ($6.55 billion).

According to a recent Finance Ministry report, Russia spent 424.1 billion rubles ($13.7 billion) on paying down and servicing foreign debt in 2002, Interfax reported.

The government should introduce an additional export duty rate for when the oil price rises above $25 a barrel to raise budget revenues, Kudrin said.

If oil prices remain high, the government will have to fight to keep inflation within the targeted 10 percent to 12 percent range, he said. (Reuters, MT)