Mr Gryzlov, deputies,

Today, the government is presenting a report on the federal budget for 2009. This report was first submitted prior to the approval of the budget for the next planning period, and deciding on the next budget we can fully review both the resolved and unsolved issues in 2009, included in the report.

The 2009 the budget was the most difficult in the past ten years. The world and Russia are still experiencing a deep financial crisis. Its effects have not been eliminated completely. It will only be at the end of 2012 that we will arrive at the GDP levels achieved before the crisis in 2008.

However, we can already say that the measures taken in 2009 at the peak of the crisis, when Russia's GDP fell by 7.9%, enable the country to emerge from the crisis to intensify the investment process, to maintain the progress of social guarantees for the public that we had before the crisis, and fully secure all state social obligations within the capabilities of the government and federal budget.

I would especially like to say that the anti-crisis measures taken by the State Duma, the president and the prime minister, were appropriate, given the lessons of the crisis of 1998. Therefore, Russia came to the crisis as one of the most prepared countries in terms of reserves and the strength of our fiscal policy. In 2009, we were able to put our policies to the test, policies which were created before the crisis. Using the reserve during the crisis, when federal revenues fell 20% and expenses rose 28%, provided crucial support not only for social benefits, but it also stabilised the economy, supported the basic industries of the country, helped to maintain the level of social commitments and the achieved level of real income.

Unlike other countries who know how to prepare for a crisis and have a strong network of economic and financial institutions, we were able, in contrast even from them to keep the bar, in real income, at pre-crisis levels - it has not decreased in contrast to other countries and is currently growing. This is the main social indicator of any government and the result of its fiscal policy.

Public confidence in the financial system is restored. Remember 1998? Many people lost their account deposits when the banking system collapsed. This deterred future economic growth and confidence in Russia as a solvent partner. There was a default and a large devaluation - from six roubles to the dollar, if you remember, by the end of 1998, it dropped to 12, then to 18 roubles, and then within a few years, to 30 roubles to the dollar. There has been a devaluation of the rouble as currency several times, and it is always a factor that hampers business and changes the import/export dynamic. These were among the greatest risks in the evaluation of the Russian Federation.

The measures we adopted before the current crisis enabled us in 2009, with the aid of budget support, to maintain solvency in terms of foreign and domestic debt, but also the debt and obligation of the state to the public. Last year, we supported the market. We had a stimulus package amounting to 1.23 trillion roubles in every key sector ranging from support for the unemployed, which increased to 4,900 roubles, to the basic sectors of our industry. These include agriculture, aviation, shipbuilding, engineering, defence - all of these industries were supported. A number of industries, such as the defence industry and the agro-industrial complex, even saw economic growth during the crisis period.

Regarding the financial system, we seriously backed the capital of key, fundamentally important banks in the country. The end of 2008 saw uncomfortable developments - the public withdrew up to 400 billion roubles a month from banks. But in early 2009, the public, seeing that the government had shored up the banks, invested capital, granted subordinated loans, once again began to increase deposits. And last year, another crisis year, corporate deposits grew 10.5% and personal accounts by 26.7%. Depositors increased the amount of their deposits by 25% over the amount available at the beginning of last year. They increased their deposits in the banks, because there was trust.

Today, we can say with full confidence that the measures taken were appropriate, social guarantees have been maintained and the financial community is prepared to invest in the economy. The first half of this year has already shown a growth in the loan portfolio of 2% and we expect growth of 5% to 10% by the end of the year. Gradually, slowly, but we are coming out of the crisis.

Last year, we received approval to support the constituent entities of the Russian Federation. We increased support to balance the budgets of the constituent entities by 140 billion roubles. As a result, regional expenses in the past year did not decrease compared with 2008, despite the fact that their revenues had decreased by 14%. This is the success of our inter-budgetary policy: we helped maintain the level of expenditures and, accordingly, helped the constituent entities of the Russian Federation with items such as social and investment commitments.

Let me remind you that pensions were increased four times in the past year with a total pension increase of 35%. No country could ensure the growth of social obligations, especially to retirees, in these numbers.

If they say that economic growth is drawing down in Russia, that we look worse than other countries, then I can now say that Russia still has an imperfect economic structure. We still have a very high proportion of revenue from the oil and gas sector, the vulnerability of which became more evident during the crisis. This affects the additional risks associated with the outflow of capital, and again, confidence in the financial sector. But thanks to the government's prepared measures, special measures, crisis management support and accumulated reserves, we have maintained our social obligations, and in some cases even increased them. But most importantly, we kept all the basic government programmes intact. These reserve funds were created for this.

Regarding the qualitative indicators of our fiscal policy, today we can say we look better and we have managed to maintain our position compared to other countries, even leading countries, even G8 countries. The conclusion is that by effectively organising these measures, we can, even given more limited capabilities than those of developed countries, ensure the stability of basic industries and social stability. This is the main conclusion that we can make. This was achieved with a common effort, thanks to key decisions being made on the eve of the crisis and last year; these decisions were supported by the State Duma.

We implemented a series of new programmes that have never been done before to support the demand for domestic products. Not only did we make decisions that give priority to the public purchase of domestic products, such as the automotive equipment that was purchased, we provided money for the purchase of buses and other vehicles for municipalities, vehicles for federal purposes, and we updated equipment and the vehicle fleet. Consequently, the key companies in the automotive industry were able to survive. We also made purchases and invested 50 billion roubles in the authorized capital of Russian Railways to purchase locomotives and rail cars. Industries in key cities, including single-industry cities, received orders. The anti-crisis programme totalled 1.230 trillion roubles.

We ran a deficit for the first time, an objective deficit. We do not presume that there can never be a deficit. All of our actions before the crisis were based on the fact that when revenue falls, when oil prices fall, a deficit will be unavoidable. Any government spending that would remain unchanged in these conditions would mean that we have to borrow from somewhere and use the reserves, and this will affect the deficit. Accordingly, we had originally planned for a deficit of about 8%.

Originally, budgeted for 2009, we forecast oil prices at $95 per barrel. When the crisis struck and the first quarter saw an average price of $43, in other words half or even less than planned, we changed the forecasts. The new crisis forecast, for the beginning of last year was $41 for the whole year. But in fact, by the end of the year, oil price increased to $61 per barrel. Given this more favourable external climate, we have a deficit of not 8%, but only 5.9%. This is normal. This is a moderate, reasonable deficit for such a critical year, fully secured by the Reserve Fund, the National Welfare Fund and borrowing on domestic markets.

Last year we did not participate in foreign markets. We did not have to queue up in global financial markets or ask the International Monetary Fund for money. We managed to use the internal resources of the country to perform this task. The Reserve Fund was intended not only to create a reserve for these difficult periods. The second major task of the Reserve Fund, created before the crisis, is for the times when oil revenues are plentiful, when currency flows into the country are very large, and cannot all be fully exchanged into U.S. dollars but are used in roubles. This will create an excess money supply, and will create either high inflation, or a very strong appreciation of the rouble. If we did not create the Reserve Fund, the rouble would not be up to 24 roubles per dollar, but, for example, 15 or 16 roubles per dollar.

Is that good or bad? That would mean the absolute lack of competitiveness of Russian industry. Imports become cheaper on the strengthening of the rouble and begin to beat out Russian goods and supply of our products becomes so expensive that it is not in demand anywhere. Excessive appreciation of the rouble, when it is not related to the usual stable operation of the country and is related only to changes in the global economic climate, is capable of killing the competitiveness of the Russian economy. Therefore, the main role of the Reserve Fund, when we have an excess supply of currency as a result of the global economic climate and not our own efforts, is for us to restrain the rouble and inflation. Simultaneously, we are able to spend when there is capital flight, as has happened during the crisis.

Creation of reserves helps reduce the rate of rouble strengthening and prevent a fall in the rankings of Russian industry. It leads to a reduction or maintenance of inflation, which enables us to retain reasonable lending rates in order to ensure competitiveness with foreign loans, and finally, to establish a reserve for crisis periods. These are the challenges facing the Reserve Fund. I also want to note that during the crisis, until we have deficits and we spend the reserves, the budget still depends to a great degree on oil prices. Last year, balancing the budget would have been possible only at $98 per barrel, a very high oil price.

Our objective is to gradually reach a balanced budget at $70 per barrel by 2015. To do this, we need to gradually reduce our spending and the deficit. And by 2015 we will do it quietly, smoothly, without cancelling social obligations or even indexing them to the inflation rate and the necessary programmes.

In conclusion, I want to say that at this moment, our public finances are in healthy condition and they have passed the test of the crisis. Today, we are ready to continue all the programmes we started before the crisis.

Thank you.