March 19 (Bloomberg) -- Russia won’t resort to printing money to cover budget deficits that Prime Minister Vladimir Putin said are likely to continue for the “next few years.”

The government should tackle the deficit “by using the reserves that have been accumulated in recent years, or if necessary by borrowing under market conditions,” Putin told the Cabinet in Moscow today, adding that Russia doesn’t yet need to borrow and won’t seek loans abroad. “Resorting to a printing press would be unwise and extremely dangerous.”

Finance Minister Alexei Kudrin said the government plans to borrow 410 billion rubles ($12.3 billion) more than it repays on the domestic market this year, which amounts to about 1 percent of gross domestic product.

Russia’s revised 2009 budget contains a deficit of 2.98 trillion rubles, or 7.4 percent of planned GDP of 40.4 trillion rubles. Kudrin said on March 14 that the deficit may exceed 8 percent of GDP. The deficit will be reduced to 3 percent of GDP in 2011, according to a draft of the government’s anti-crisis plan distributed to reporters.

The government approved the plan and the revised budget with Russia’s first deficit in a decade as it attempts to stabilize the economy with a 1.6 trillion ruble bailout modeled on plans developed by the U.S. and U.K.

Recession

The government expects the economy to contract 2.2 percent this year -- Russia’s first recession in a decade -- as prices for oil, gas, metals and other commodities slump because the global economic crisis is weakening demand around the world.

Economy Minister Elvira Nabiullina said capital outflows from Russia this year will amount to about $80 billion.

The original 2009 budget was based on an average oil price of $95 a barrel, while the revision was calculated on an average price of $41 a barrel and an inflation rate of about 13 percent.

Inflation will slow to 10 percent next year and to 7.5 percent in 2011, according to the anti-crisis plan.

Putin warned state financial agencies not to treat Russia’s economic crisis as an opportunity for “terrorizing” business, singling out the tax and customs agencies.

“Their main task remains the enforcement of the tax laws,” Putin said. “At the same time, we have the right to demand responsible behavior from business.”

The government plans to spend 9.7 trillion rubles this year, an increase of 667 billion rubles from the original 2009 budget approved last June, even as revenue drops to 6.7 trillion rubles, a decrease of 28 percent from 2008.

Oil Funds

The government’s Reserve Fund, which rose to 4.87 trillion rubles in February, will guarantee the state’s ability to meet spending targets even if the price of Russia’s exports decreases further, according to the anti-crisis plan.

The state will spend 2.75 trillion rubles from the Reserve Fund this year, while the National Wellbeing Fund, which advanced to 2.996 trillion rubles in February, will fall to 2 percent of GDP by the end of 2011, according to the plan.

Kudrin said the government won’t step in to save all companies it has deemed essential to the economy, and some may go bankrupt. The state so far plans to support OAO AvtoVAZ, Russia’s biggest carmaker, OAO GAZ, billionaire Oleg Deripaska’s vehicle maker, and Rosatom Corp., the government’s nuclear holding company. Rosatom will receive 50 billion rubles to boost capital, Kudrin said.

The state has no plans to capitalize non-defense companies, including Deripaska’s United Co. Rusal, Kudrin said.

A 10-day period for public discussion of the anti-crisis plan starts today, during which it will be debated across the country in town hall-style meetings.

The seven-point plan includes social welfare, maintaining industrial capacity, boosting domestic demand, promoting small business, tackling corruption, supporting the financial system and laying the groundwork for long-term development.

To contact the reporter on this story: Alex Nicholson in Moscow at anicholson6@bloomberg.net

Last Updated: March 19, 2009 14:49 EDT