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. Last Updated: 07/27/2016

Cabinet Blesses Spending Spree

Itar-TassMinisters hope increased spending in 2006 will help tackle social problems.
The Cabinet on Thursday approved a draft 2006 budget, giving the go-ahead for the biggest increase in public spending since the August 1998 economic meltdown.

Spending will increase by around 50 percent next year, as the government seeks to target those who are less well-off, including senior citizens, who will see their pensions more than double.

The budget aims to solve the country's "acute problems, particularly within the social sphere," Prime Minister Mikhail Fradkov told the Cabinet on Thursday, the government's web site said. Money would be spent on tripling the real income of state employees, including judges and prosecutors, he said.

The draft forecasts budget revenues in 2006 of 5.46 trillion rubles ($191 billion), an increase of about 50 percent.

Government spending will rise to 4.27 trillion rubles ($149.3 billion) in 2006. The government expects to spend just less than $100 billion this year.

The draft forecasts a surplus of 776 billion rubles ($27.4 billion), equivalent to 3.2 percent of gross domestic product.

The new budget marks a shift in the tight fiscal policies of the past seven years, when authorities kept a firm grip on spending despite the huge influx of petrodollars.

Strict budgetary discipline was first introduced after the events of Aug. 18, 1998, when reckless monetary policies coupled with extremely low oil prices forced Russia to default on its sovereign debt. That event sent millions of the country's citizens into poverty.

Spending on national security, which includes intelligence, policing and the military, will receive some 1.2 trillion rubles ($41.96 billion).

The increase in spending comes after years of strong economic growth, with the economy forecast to grow by 5.9 percent this year. Next year, the economy is expected to grow by 5.8 percent.

Both figures are below the over 7 percent annual growth rate needed to meet President Vladimir Putin's pledge made in 2003 to double GDP within a decade.

Cabinet members have long debated whether the goal is achievable. Finance Minister Alexei Kudrin weighed in on the issues of the debate Thursday.

"I think doubling GDP is possible," he said after the Cabinet meeting, Interfax reported. But he said it would be possible only if real institutional reforms were carried out.