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. Last Updated: 07/27/2016

Cabinet Adds $4.1Bln for Pensions

ReutersPolice removing an effigy of President Putin at a rally in Nizhny Novgorod on Tuesday.
The Cabinet on Thursday earmarked an additional $4.1 billion for pensioners in an attempt to calm public anger over the government's move to monetize social benefits. The average rise in pensions will amount to 240 rubles ($9) and come into effect March 1.

A possible source for its financing may be the stabilization fund, Finance Minister Alexei Kudrin said Thursday.

The fund, a reserve created as a safeguard against a sharp drop in oil prices, held $18.6 billion at the end of December.

"The stabilization fund will be used to help lower taxes and support reforms to social benefits in 2005. And we do not exclude, if necessary, the idea of taking [money] from there to deal with the high point of the reform," Kudrin said Thursday, Interfax reported.

"Afterwards, of course, we would more closely monitor the use of the fund."

Kudrin said the next pension hike is planned for August.

Originally the government had planned an average 100 ruble pension increase as of April 1. The sum was boosted on orders from President Vladimir Putin earlier this month, as protesters took to the streets across the country.

Health and Social Development Minister Mikhail Zurabov said the monthly 240 ruble increase was only an average figure, which could be significantly higher in certain cases.

A maximum of 1,200 rubles ($43) will go to war veterans aged 80 or over who sustained war wounds, which will bring their total pensions to between 6,800 rubles ($240) and 7,200 rubles ($280) per month, Zurabov said. There are more than 280,000 World War II invalids in Russia.

The federal government also plans to allocate additional funds to a number of regional authorities to maintain free public transportation for the elderly and other low-income groups, Interfax reported.

Kudrin stressed, however, that the extra payments, which effectively double the initially planned costs for the reforms, will not negatively affect the country's 8.5 percent inflation target for 2005.

Anton Struchenevsky, an economist at Troika Dialog, agreed. "If you look at the nation's trade volume -- currently at 5.5 trillion rubles [$196 billion] -- whatever cash is spent on pensions is a drop in the ocean," he said. "Inflationary pressure is much more likely to arrive from more serious factors like the combination of economic stagnation and rapidly growing demand."

The Cabinet's move appeared to have done little to change the mind of Communist Party leader Gennady Zyuganov, who is pressing for a vote of no confidence in the government. There will be enough support among State Duma deputies to raise the issue next week, Zyuganov said Thursday. By law, at least one-fifth of the Duma, or 90 out of the 450 deputies, have to back the proposal.

"As we all know, the Duma is not in session this week," Zyuganov told Interfax. "But many have already agreed to sign by telephone ... demanding the no-confidence vote."

Struchenevsky said the reform of social benefits was completely justifiable from an economic point of view. "The reform is a very positive move. It's the implementation of it is that's bad," he said, reflecting a widespread consensus among economists.