World Economy

Russia Approves $9b Anti-Crisis Plan

Russia Approves $9b Anti-Crisis PlanRussia Approves $9b Anti-Crisis Plan

The Russian government has approved a 684.8 billion ruble ($9.3 billion) anti-crisis plan as the country’s economy struggles with low oil prices and western sanctions, and looks set to contract for a second consecutive year.

Russian Prime Minister Dmitry Medvedev said late Tuesday that he had signed off on the 120-point plan designed to “guarantee the stable social and economic development of the Russian Federation in 2016,” IBTimes reported.

The Russian economy shrank 3.7% in 2015 and rating agency Standard & Poor’s said last week it expected a second year of recession in 2016, with gross domestic product predicted to contract by 1.3%.

The price of oil, Russia’s chief export and forex earner, collapsed from highs of $115 a barrel in mid-2014 to below $30 a barrel earlier this year.

The anti-crisis plan approved by the government comes after weeks of wrangling and is substantially smaller than initial proposals. Russian Economic Development Minister Alexei Ulyukayev told a Feb. 18 cabinet meeting that the anti-crisis plan would cost 880 billion rubles ($11.9 billion).

“The size of the plan suggests that the finance ministry has successfully repealed efforts to boost spending as earlier versions of the plans called for a more aggressive approach,” analysts at Bank of America Merrill Lynch said in a note to investors Wednesday.

The majority of the funds—462.2 billion rubles—for the rescue plan would be drawn from the budget in its existing form, but the government has yet to determine where the remaining 158 billion rubles will come from, the Vedomosti business daily reported Wednesday.

Russia has several rainy-day funds, built up during years of high oil prices, and the central bank reported (Feb. 19) foreign currency reserves of $379 billion. Vedomosti speculated Wednesday that aside from spending cuts, other possible sources of revenue could be a recent gasoline excise duty hike or improved tax collection