Russia to cut budget spending 10% as oil price continues its fall

“We have to take weighted measures now, regarding how to bring the budget in line with the new realms. I want to tell you that such decisions have already been made in the government,” PRIME reports him as saying.

“The first step – we have agreed that now, ministries and authorities – after receiving their corresponding subventions for 2016 – will choose the priorities in these subventions and will … choose themselves the most efficient spending and cuts of inefficient spending. And they will present proposals to the Finance Ministry to optimize budget spending by 10% for key ‘not reserved’ items.”

Siluanov said that budget adjustment proposals must be ready by April.

The current 2016 budget spending plan stands at  RUB 16.099 trillion, which will make for a 3% of the GDP deficit. This plan was based on an oil price forecast of $50 per barrel.

The Finance Ministry offers to axe budget investment by about RUB 500 billion, Siluanov said.

Read alsoBrent crude oil again nears $31 per barrelOil prices will continue falling, Siluanov said. “Now there is a very tough balancing of the oil market. We see that nobody is reducing production of this oil and we will soon most probably see a further price decrease for this product,” Siluanov said.

The state sector of the Russian economy and budget have not adapted to the new oil prices so far, Siluanov said. “We have to make a wide range of decisions to change the budgetary policy.”

The minister also said that state companies must reduce their spending in the same way that the government does.