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Russian government backs industries support plan — PM

January 18, 2016, 15:36 UTC+3

According to Dmitry Medvedev, cutting budget spending is necessary but it does not imply proportional reduction of all budget items

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Russian Prime Minister Dmitry Medvedev

Russian Prime Minister Dmitry Medvedev

© Alexander Astafyev/Russian Government Press Office/TASS

GORKI, January 18. /TASS/. The Russian government supported the plan of the Ministry of Industry and Trade to aid branches of industry in 2016, Prime Minister Dmitry Medvedev said at the 2016 budget meeting.

TASS reported earlier anti-crisis measures supporting car demand would remain in scope planned at the turn of the last year. Twenty billion rubles ($254.2 mln) will be allocated to this end for the first six months of 2016, Russia’s Minister of Industry Denis Manturov said earlier.

The ministry has undertaken a range of measures aimed to support car sales in conditions of recession and worsened automobile market situation. The ministry is partly compensating costs of production upgrade, support of jobs, etc., to automakers. At the same time, sales are supported through preferential leasing, car loan benefits, scrap and trade-in programs.

The government was also reported to allocate 600 mln rubles ($7.6 mln) to light industry companies producing school uniform. Support of transport machine-building and subsidies for sectors were also discussed. 

Cutting budget spending does not imply proportional reduction of all budget items

According to Medvedev, cutting budget spending is necessary but it does not imply proportional reduction of all budget items.

"I should in particular stress that cutting spending is necessary. Unfortunately, there are no perfect solutions that would suit everyone. But in any case it does not imply proportional reduction of all budget items," Medvedev said.

He added that it is necessary to optimize costs so it would not damage those positive trends that have taken shape in the Russia economy.

According to Medvedev, it concerns first of all such branches of the economy as agriculture, metallurgy, certain segments of the chemical industry, machine-building, railway machinery.

"A certain impetus has been given to all these branches and we should not lose it. It is necessary to take the most active steps in budget planning and other fields in order to maintain these positive shifts and to strengthen them if possible," - the prime minister said.

Medvedev expressed confidence that even in the current difficult economic conditions, "one can and should finds an adequate set of measures for every industry, measures that will support these growth points and gradually reach the sustainable development of the whole economy."

This should be done with any dynamics of commodity prices, the head of the government said, "otherwise we will come back to budget cuts constantly," Medvedev said.

The official said that Russia must not abandon plans to create a more modern structure of its economy and the current complex conditions should contribute to this.

"We should not abandon the goal of a more modern structure of the economy even in these difficult conditions. On the contrary, it is perhaps only now that we have received an opportunity to do it most intensively," - he said.

New single tax payment system to allow getting area under control

The head of the russian government also dwelled upon the new single system of tax payment collection saying it will allow getting this area under control. Medvedev requested to create a single, not self-contradictory system of collecting tax payments comprising the Federal Tax Service, the Federal Customs Service, the Federal Service for Alcohol Market Regulation (Rosalkogolregulirovanie) and administration of social fees.

"Losses of budget due to non-transparent schemes, which are being used in order not to pay taxes, result in very substantial sums. The new system, which should be used on universal basis, should be premised on highest information technologies. Hopefully, it will allow to get (the area) under control," Medvedev said.

Last week Russian President Vladimir Putin welcomed the initiative to merge the Federal Tax Service, the Federal Customs Service and the Federal Service for Alcohol Market Regulation in one single system of tax and non-tax payments’ administration. PM Dmitry Medvedev suggested that "a single system of tax and non-tax payments’ administration within the Finance Ministry should be created", adding that "the system would keep the federal tax service … to be merged with the federal customs service … and Rosalkogolregulirovanie." Medvedev said a respective draft presidential decree has been submitted to the president by the government.

The president set the task of creating a single system of administrating customs, tax and other public payments in his annual address to the Federation Council in early December.

Oil prices dynamics is hardly predictable 

The prime minister pointed out thay the dynamics in oil prices is hardly predictable, lifting sanctions against Iran has prompted a further decline in oil prices.

"The further dynamics in oil prices is hardly predictable. Moreover, you know that the sanctions against Iran have been lifted and oil has continued to decline. Respectively, there are still big risks for the replenishment of budget, meeting budget obligations and for the economy in general," - Medvedev said.

The Prime Minister said that in order to implement the budget it is necessary to take additional measures. In particular, these measures concern replenishment of the budget income part as well as efficient reduction of budget spending

Earlier this month, Finance Minister Siluanov said that ministries and departments need to reduce federal budget spending by 10% in 2016. This will save more than 500 billion rubles ($6.4mln) to the federal budget, he said.

Siluanov said that his ministry may review 2016 budget in the first quarter. He said it would concern not only costs optimization but also an increase in the income part.

The Economic Development Ministry renewed its forecast of Russia’s socio-economic development for 2016. According to the ministry, the average annual ruble rate will be 68.2 rubles/$1; Urals oil price is $40 per barrel, inflation is 8.5%; capital outflow is projects at %50 bln. The GDP is to decline by 0.8% against the anticipated growth of 0.7%.

Under such parameters, the Finance Ministry plans to meet the budget deficit limit of 3% of GDP.

At the same time the Economic Development Ministry also considers a stress scenario with the oil price of $25 per barrel and the ruble rate of above 80 rubles per dollar 1. In this case, according to Economic Development Minister Alexei Ulyukayev, the budget deficit may rise to 7-7.5% of Russia's GDP in 2016.

Russia’s 2016 federal budget is based on the Urals crude oil price at $50 per barrel while at the moment the price is below $29 per barrel.

The budget projects revenues of 13.738 trillion rubles (about $196 billion) and expenditures of 16.099 trillion rubles ($229.9 billion) with a budget deficit of 2.36 trillion rubles ($33.9 billion) or 3% of GDP.

The 2016 budget is based on the inflation rate of no more than 6.4% (December 2016 on December 2015). Since the start of 2016, Brent price fell by 21.3%.

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