- Government has to find funding for 134 billion rubles in plan
- Russia will tap sovereign wealth fund for anti-crisis measures
Russia’s government will present President Vladimir Putin Wednesday with a $10.5 billion plan to revive the shrinking economy. The problem is where some of the money will come from.
The Economy Ministry is proposing 828 billion rubles ($10.5 billion) of anti-crisis measures, according to a copy of the draft proposal submitted to the government and obtained by Bloomberg. While the plan assigns funding for most of the spending, the government still has to find sources of financing for at least 134 billion rubles, including money to bail out state development lender Vnesheconombank, according to the 180-page document, which also includes proposals from various ministries to support their industries.
The world’s biggest energy exporter is battling its longest recession in two decades, its economy battered by the drop in oil prices and international sanctions over the Ukrainian crisis. The government is now preparing to step in to shore up dwindling investment even as policy makers struggle to contain the budget deficit, which ballooned to almost 3 percent of gross domestic product in 2015, the widest in five years.
“We have to discuss all these proposals, to take decisions that will correspond to our current capacities,” Prime Minister Dmitry Medvedev said Wednesday at a government meeting in Moscow before the plan is put to Putin later in the day. “We’ll be extremely careful as there may not be enough money for all areas, and it’s necessary to understand that.”
Besides measures to support the car industry, transport, construction and agriculture, which are already included in the plan, there’re other areas in need of government funding and requiring a discussion, according to Medvedev.
“Only rising oil prices will give the government back some breathing space,” said Wolf-Fabian Hungerland, an economist at Berenberg Bank in Hamburg, Germany. “The fundamental business model of the Kremlin is likely to remain selling oil abroad and nationalism at home.”
The biggest spending items in the plan, which account for 59 percent of the total, are:
- Lending to regional budgets: 310 billion rubles
- Support for the car industry: 137.6 billion rubles
- Funding for Russian Railways: 39.8 billion rubles
Financing breaks down as follows, according to the plan:
- Federal budget: 447 billion rubles
- The government’s anti-crisis fund: 207 billion rubles
- National Wellbeing Fund: 39.8 billion rubles
- Unspecified: 134 billion rubles
The ministry confirmed that it has submitted a plan to the government, though Elena Lashkina, an aide to Economy Minister Alexei Ulyukayev, declined to discuss its details when reached by phone.
The sources for the remaining 134 billion rubles will depend on this year’s budget performance, according to the plan. Among the unaccounted spending are measures to support Vnesheconombank and provide for the recapitalization of Russian Agricultural Bank, known as Rosselkhozbank, which may require as much as 10 billion rubles. Another 16.5 billion rubles may be needed to extend a state program to subsidize mortgages.
The plan also proposes the sale of Russia’s largest state-owned companies, without revenue estimates. Additional measures include improving the judicial system and easing administrative procedures for small and medium-sized businesses.
The plan doesn’t include proposals from the Finance Ministry, which have been sent to the government earlier.