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. Last Updated: 07/27/2016

Dvorkorvich Revises Budget Deficit

Top Kremlin economic aide Arkady Dvorkovich said Wednesday that the government is planning on a budget deficit of 8 percent of gross domestic product this year, a forecast revised upward from the 6 percent-figure he gave The Moscow Times last week.

Dvorkovich said that despite the budgetary constraints the state would spend more on pensions, child benefits and regional budgets, incrementally raising them to keep up with inflation rates.

"No matter what, we should give the highest priority to the state’s social commitments," he said.

The state can afford to spend half of its 4.9 trillion ruble Reserve Fund to cover the budget deficit, Dvorkovich said, and will have enough left over cover a deficit in 2010 if necessary.

He added that the deficit will include subordinated loans given to commercial banks from the National Welfare Fund.

The deficit could swell as high as 10 percent of GDP if it becomes necessary to cover the government’s commitments to social programs, he said.

Speaking in English on a panel with RusAl chief executive Oleg Deripaska, Dvorkovich provoked confusion with his comments as Russian reporters, listening to the speech on translation devices, mistook the 10 percent figure as the planned deficit.

Reading a newswire report on his personal digital assistant, he spoke up to correct the misinterpretation and chide the reporters for their "efficiency," referring to the carelessness on reporting the figure.

Speaking after Dvorkovich, Deripaska also highlighted the necessity for the state to assist people, especially in regions outside Moscow.

"I do believe we have quite a strong political system," he added. "I'm talking about United Russia," a pro-Kremlin political party.

The crisis will provide an opportunity to improve the country's infrastructure, as Soviet leader Nikita Krushchev did in the 1960s, Deripaska said.

"Krushchev gave opportunities to millions of people. … Of course today we blame the houses," he said, referring to khrushchyovki, the ubiquitous concrete-paneled apartment buildings found throughout the city. "But it was a great opportunity," he said.

Russia is in better shape to survive the crisis than it was in 1998, and there are more opportunities for consolidation and vertical integration across industries, he said.

"It's a good opportunity to clean the system and restart again," Deripaska said.

RusAl was able to cost cuts by 30 percent in a short period and will be able to reduce staff by 30 percent as well, he said, adding that the economy was likely to be in "good shape" within a year.

Zoran Vucinic, president of Coca-Cola in Russia and another speaker on the panel, was less sanguine, however.

Too many businesspeople are treating the financial turmoil as an opportunity, he said. "What we have in abundance is uninformed optimism.”