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12 Oct, 2009 08:19

Medvedev says budget deficit will be reigned in as soon as possible

Russian President, Dmitry Medvedev, calls for the economy to move from energy reliance in just over a decade and emphasizes that moves to address the economic downturn should limit Russia’s long term plans.

Speaking about the more immediate economic concerns, the Russian president indicated the economic downturn in the wake of the global credit crunch had hit harder than expected and that this in turn had pounded the Russian currency – the Rouble – and meant that the country is now heading for budget deficit.

But he indicated that the economy would begin to turn, and that the Rouble had already stabilized. He also said that a budget deficit would be serviceable and that he was looking to reign it in as soon as possible.

“The real damage to our economy was far greater than anything predicted by ourselves, the World Bank and other expert organizations. In the beginning there was talk of seeing the economy drop by 3 or 3.5%, but this year we are expecting to see the GDP decline by 7.5%.

The national currency situation was also quite difficult. At the beginning of the year the Rouble became significantly weaker. This was an unavoidable move, which occurred in an orderly way. We didn’t allow for abrupt, intermittent changes in our exchange rate. Nethertheless, nobody was happy about the weakening of the Rouble, because it painfully hurt people’s incomes. Currently the situation with the Russia’s currency market and the Rouble is entirely calm and stable.

It’s true that we now have a very tight budget, which used to be deficit – free or, as economists say, we had a budget surplus, because Revenues exceeded expenses. Now we have a budget deficit, and next year it will be quite significant. Nevertheless, we are perfectly capable of functioning with this deficit and servicing it. This is not a tragedy not a catastrophe for the economy – it simply means that we have to work really hard to improve.

Our goal is to achieve a balanced budget or a budget with a minimal deficit within a year. And all the government's efforts and decisions should be directed to this end.
But overall stability, macroeconomic stability, fiscal stability – all these will of course be maintained. There should be no doubt whatsoever about this. We are obliged to make all our payments as they come due: social payments, those associated with the financing of major industrial and economic programmes, payments to the military, and our international obligations."