Plan to slash spending

RUSSIA / FSU POLITICS - In Brief 23 Jul 2020 by Alex Teddy
On July 21 it was reported in RBK that the Finance Ministry aims to reduce government spending by a drastic 10% in 2021. The objective is to return the country to fiscal health after the deficit soared due to coronavirus and low oil prices. The aim is to slash USD 65 billion from the budget 2021-23. The news is not an announcement but a leak - possibly a deliberate one to test the reaction.Defense spending might be cut by up to 5%. Since the 90s defense has been sacrosanct. Public services salaries would no longer be index linked. In an awful job market public servants will presumably grumblingly accept this.The 2020 budget is USD 325 billion. 2021 is supposed to be USD 300 billion under this draft proposal. Fiscal conservatism was briefly abandoned owing to the coronavirus exigency. In 2021 fiscal conservatism will come back with a vengeance. Since 2014 Russia has viewed a budget surplus as being a high priority. The country saved billions of USD from oil exports.In 2020 there will probably be a 5% GDP deficit. That is due to the oil price collapse and lockdown. Bonuses were paid to doctors and parents with minor children were given extra welfare payments. Notably, Russia's goal to be a top 5 economy has been abandoned indefinitely.

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