Kremlin’s ‘stability’ is Russia’s financial crisis

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2015/02/12 • Russia

Anti-crisis expenses cut by half because there is no money at all.

At least one trillion 375 billion rubles will be spent on saving the Russian economy from crashing in 2015. This sum was stated in the ‘Plan for the provision of stable economic development and social stability in 2015.’ The term ‘crisis’ is not used in the document at all.

Almost three trillion rubles were planned for anti-crisis measures to begin with. However, the money is nowhere to be found, therefore Russia simply cut by half the expenses planned for the salvation of the economy, which is officially named as “stable.” Russian President Vladimir Putin liked the fact that the amount was cut by half and he approved the anti-crisis plan proposed by the government, reports BBC.Russia. The document will now be sent back to the government for additional work and then proposed for signing to Putin once again.

Russian Vice-Prime Minister Igor Shuvalov explained the decrease of the amount planned for the execution of the anti-crisis plan with the necessity to remain within “reasonable limits” of the 2015 budget deficit.

“The expenditures for this plan in this amount are humongous. In order to ensure macroeconomic stability, we should not violate any reasonable limits. We will have to refuse certain measures in this amount to ensure we maintain those limits,” Shuvalov thinks.

According to the Vice-Prime Minister, the spendings on this plan will be bigger than initially expected, however, they would be less than during the 2008-2009 crisis.

Money for the anti-crisis program will be taken not only from the Fund for National Welfare, but also issued in the form of state guarantees and budget loans.

Russian Minister for Economic Development Alexey Uliukayev noted during a meeting with Putin that the economy tends towards stabilizations, however the threat that the country’s rating would reach new lows adds new risks.

“The participants of the market are afraid that the ratings will drop below the investment level. This definitely leaves a print on the situation at the currency markets, overall at financial markets,” RIA Novosti cites.

Inflation throughout the tear will slightly surpass 13 percent and by the end of the year it would be the same level as it was by the end of 2014, assumes the head of the Ministry for Economic Development.

Meanwhile, because of the sanctions, the fall of the ruble and the oil prices, as well as the Russians’ mistrust, the revenues of Russian banks last year fell by 40,7 percent compared to 2013, and constituted 589 billion rubles. Therefore, the financial institutions suffered a deficit of 400 billion rubles.

The Russian ruble is falling constantly. The fall is also influenced by the Western sanctions imposed due to the Kremlin’s aggression against Ukraine, the fall of oil prices (as the Russian economy is 50 percent dependent on the oil prices), as well as the recent lowering of loan ratings of individual regions, cities, companies and Russia overall.

Translated by: Mariya Shcherbinina
Source: TSN

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  • Michel Cloarec

    Western sanctions are not responsible for russian economical collapse. Any country with competent knowledge of modern economy would manage to counterfight .
    Russia was already on economical decline long before the sanctions were introduced.
    Oil price has nothing to do with sanctions, Ruble fall is resultat of a poorly organized market economy !