Budget Deficit Could Drain Much of Stabilization Fund

A significant portion of Russia's $215 billion stabilization fund will be spent in 2009 to cover the country's budget deficit, said Finance Minister Alexei Kudrin at a State Duma meeting on Friday. “This year is the peak of the crisis, and we’re starting from the idea that a significant part of the Reserve Fund will be spent, but not all,” he said. The country is facing a budget shortfall of 4.4 trillion rubles ($124.6 billion), or 5.4 percent of GDP, and if the government's 2009 budget is not revised, the deficit could reach as much as 6.1 percent of GDP. On Jan. 22, Prime Minister Vladimir Putin ordered the Finance Ministry to revise its 2009 budget based on a new average oil price of $41 per barrel, down from the previously forecast $70. Urals blend crude, Russia's main oil export, was trading at $43 a barrel on Friday, down from its July high of $143. Last year the stabilization fund, supplied since 2004 by windfall oil and gas revenues, was divided into the National Welfare Fund and the Reserve Fund, which stand at 2.8 trillion rubles and 4.5 trillion rubles, respectively. In December, the welfare fund loaned 340 billion rubles to Vneshekonombank, as part of a $200 billion dollar bailout package aimed at revitalizing the country’s ailing financial sector. First Deputy Prime Minister Igor Shuvalov, speaking to the parliament on Friday, said the government would "most likely" have to cut back on expenditures in 2009.