As expected, Russia’s State Duma adopted the federal budget for 2002 in its fourth and final reading on December 14. The Federation Council approved it on December 26, sending the document to the Kremlin for the president’s signature. The final version of the budget calls for revenues of 2,126 billion rubles (US$68 billion) and expenditures of 1,947 billion rubles (US$62 billion). The surplus revenues are to be used for debt repayment and to build a financial reserve. An amendment was passed in November linking a portion of the spending to the actual level of revenues collected throughout the course of the year, and allowing expenditures of 68.5 billion rubles to be pushed back to the final quarter of 2002 should revenues fall significantly below expectations. While the government promises that it will fulfill its obligations, it is not clear whether the “postponed spending” will be carried out if budget revenues decline substantially. The government said that it would have sufficient funds to make all the budgeted expenditures in 2002 even if oil prices were to fall as low as US$15 per barrel. The implicit assumption underlying that statement (which appears realistic) is that the nonenergy sectors of the economy will continue to perform reasonably well in 2002.
Overall, the largest categories of expenditure in the 2002 budget are: social policy (RUB 430.3 billion), debt service (RUB 285 billion), national defense (RUB 284.1 billion), transfers to regional and municipal budgets (RUB 265.4 billion), law enforcement and state security (RUB 173.8 billion), and education (RUB 80 billion). If oil prices decline sharply, the government is ready to issue a new Eurobond. A restructuring agreement with Russia’s Paris Club creditors also remains a possibility. If oil prices rise substantially in 2002, a special government reserve will be set up to accumulate excess revenues. The reserve is to be used primarily to repay the national debt. The government is to report to the State Duma every three months on the use of the financial reserve. Russia therefore looks as if it will have another fiscally responsible budget in 2002 (PlanEcon Report, December 28, 2001).
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