World Economy

Russia Budget Cut Misleading

Russia Budget Cut MisleadingRussia Budget Cut Misleading

A Russian plan to cut 10% from this year’s budget is at best misleading. But large areas of the budget are excluded from the cuts and Russia has a poor record of meeting its own targets, Reuters reported. Despite this, Russia is still squeezing expenditure as global prices of its main revenue earner, oil, remain well below levels needed to balance the budget. Once the government has protected President Vladimir Putin’s favored spending areas such as welfare and defense, it will struggle to make savings worth a third of that. The plan has grabbed much attention, reassuring investors looking for signs that Moscow is taking prudent steps to respond to the oil price plunge, while also deepening concerns about the further pain inflicted on the slumping economy. But large areas of the budget are excluded from the cuts. Last year the government also promised sweeping cuts and ended up raising state spending substantially.