Russia warns on spending splurge

Russia's economy is under pressure, as it gets less for its oil and gas.

Russia's finance minister has called on the country to dramatically cut back spending because it was quickly using up a so-called "rainy day" fund.

Alexei Kudrin said a $120bn (£82bn) foreign currency reserve fund - from oil revenues - would run out by the end of 2010 at current spending rates.

But opponents want to continue military spending and other investment.

Mr Kudrin's comments came as Russia's economy shrank by 9.5% in the first three months of 2009.

And deputy economy minister, Andrei Klepach said that an International Monetary Fund forecast that the Russian economy could shrink by 6% in 2009 were "quite realistic".

He added that gross domestic product (GDP) could shrink by 10% in the second quarter between April and June this year.

Good shape

After an eight-year economic and consumer boom, the falling price of oil - its key export - has contributed to an economic nosedive.

Investors have also pulled billions of dollars out of the country, and about 1.8 million people have lost their jobs in the first three months of the year alone.

Observers say that this has raised the risk of social unrest - posing a challenge for the country's government after years of rapid growth.

BBC correspondent in Moscow, Rupert Wingfield-Hayes, said that Russia's bank balance was still in good shape, compared to the likes of the UK and the US.

"But now that the price of oil has collapsed and those revenues have stopped coming in, Russia is being forced to spend its rainy day fund, and it's doing so at a breathtaking rate," he said.

He added that Russian spending this year would outstrip revenues by $80bn - prompting Mr Kudrin's "stark warning" to preserve reserves.