Russia's Finance Ministry sharply revised the 2009 budget, revenues will fall 42 percent from earlier approved levels, and spending will rise to 9.5 trillion rubles.

Russia’s budget revenues in 2009 will fall by 42% from the previously approved level, Russian Deputy Prime Minister and Finance Minister Alexei Kudrin said on Wednesday at an expanded meeting of the Federal Treasury. At the same time, according to him, state expenditures will rise by 500 billion rubles and amount to 9.5 trillion rubles.
The 2009 budget was approved in the autumn of last year; it was based on a projected oil price of $95 per barrel of Urals crude. According to the previous calculations, the budget was supposed to be in surplus — with revenues of 10.9 trillion rubles and expenditures of 9 trillion rubles. However, due to the crisis, the Russian authorities revised the initial assumptions for economic development.
Kudrin explained that the parameters of the adjusted 2009 budget are based on the assumption that GDP will decline by 2.2% (the Ministry of Economic Development projects nominal GDP at 40.42 trillion rubles), inflation will reach 13–14%, and the average annual price per barrel of Urals crude will be within $41.
Judging by the official statistics for January, even meeting such pessimistic forecasts will require considerable effort. In the first month of 2009, GDP fell by 2.4 percent compared with the same period in 2008 and by 8.8 percent compared with December. Industrial production, in turn, decreased by 19.9 percent month on month and by 16 percent compared with January 2008.
The head of the Finance Ministry also said that his department estimates the volume of non-performing bank loans at 10%. According to him, in order for banks to be able to set aside such funds, the banking system needs to be recapitalized.
The bulk of the deficit will be covered from the Reserve Fund, which was accumulated during the period of high oil prices in previous years. In total, 2.7 trillion rubles will be spent from the fund. This means that if the situation does not change in 2010 and the deficit is the same, and Russia still does not borrow funds abroad or domestically, then the Reserve Fund will simply cease to exist: by the end of January 2009, its volume, according to the Finance Ministry, stood at 4.7 trillion rubles.
Overall, the new budget calculations turned out to be much more adequate than those in the budget adopted in the autumn. Now the government must do everything it can to stay within its own forecasts, because otherwise, especially after the failure of the first version of the budget, there will be no trust left in its work at all.