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. Last Updated: 07/27/2016

President Throws Weight Behind Cabinet Liberals

President Vladimir Putin on Tuesday threw his weight behind those in government who are determined that Russia should resist the temptation to rush to spend its oil riches inside the country.

In a statement fleshing out his thinking on 2006 budget policy, Putin said windfall oil revenues swelling a budget stabilization fund could be used only to pay down foreign debts.

This marks a clear steer for those ministers, including Prime Minister Mikhail Fradkov, who had been angling to spend cash above a 500 billion ruble ($18 billion) floor, on diverse projects, such as a sharp cut in the value-added tax.

Earlier this month, Russia's fiscally conservative Finance Minister Alexei Kudrin scored a personal victory when he struck a landmark deal to repay the Paris Club of sovereign lenders $15 billion of Soviet-era debts ahead of schedule.

Analysts have been concerned that the government was seeking to stimulate sagging growth and win popular approval by putting more money in people's pockets rather than tackling difficult problems -- like a poor investment climate and delayed natural monopoly reform.

The government has already decided to raise the cut-off oil price next year above which revenues flow into the budget stabilization fund to $27 a barrel for the country's benchmark Urals crude from $20, which will free up large amounts of cash.

Kudrin fought hard for a lower price, warning that spending the extra money inside Russia would exacerbate inflation, one of the country's main economic problems.

The Finance Ministry has forecast a budget surplus of 3.9 percent of GDP this year, falling to 1.8 percent in 2006 and 1.2 percent in 2007-08.

Russia had hoped to cap inflation at 8.5 percent this year after missing a 10 percent goal in 2004, but price growth has accelerated during first four months of the year, leading the Finance Ministry to raise its forecast to 10 percent.