Russia adopts its first surplus budget

The budget passed the parliament smoothly

Russia's lower house of parliament, the State Duma, has passed the 2002 budget, planning for the country's first surplus since the fall of the Soviet Union.

The budget plans for revenues of 2,100bn roubles, or $70.2bn (£48.4bn).

Expenditures are forecast to be $63.5bn, leaving a surplus of $6.7bn.

Oil slump

But while the figures are encouraging, they remain to some extent hostage to the state of the energy market.

The sharp fall in oil and gas prices since 11 September has forced the finance ministry to revise its calculations, given that oil and gas tax revenue account for almost half the government's income.

The first draft of the budget was based on an absolute minimum oil price of $18.50 a barrel.

Current prices are below $18 a barrel, and cheaper oil is estimated to lead to a fall in revenues of around $1bn.

Nevertheless the government said that it would be able to meet its revenue and spending plans even if oil prices fall as low as $15 a barrel, while international financial organisations believe it could sustain a fall even to $12.

If prices are even lower than that the government is ready to issue new bonds. In the event that prices rise above expectations, a special government reserve will be set up to provide a financial cushion in hard times.

The International Monetary Fund this week was optimistic about Russia's economic outlook, awarding the reforms adopted during the past two years high praise. Russia's stock marked was one of the best performing ones this year.

Expectations

Nonetheless, the government said after the vote that it remained optimistic about the country's economic prospects.

In the budget, the government foresees economic growth in 2002 of 4.3%, and says inflation will not exceed 13%.

This year's growth prospect is 5.5% with the inflation rate of 18%.

A budget amendment allows some spending to be pushed back to the final quarter of next year should revenue fall below expectations.

Although the government promises it will fulfil its obligations, some analysts are not sure that the "postponed spending" will be carried out in case state income falls.

Easy task

The 2002 budget still has to be adopted by the upper house of parliament and signed by the president.

But that is considered a pure formality now that the lower house has passed the document.

Throughout the 1990s, budget debates in the State Duma were always a severe fight between the government and the parliament.

But during the past two years a strong majority in the parliament backing President Vladimir Putin and a good overall economic situation has made the passing of the budget much more straightforward.