Prime Minister Vladimir Putin chaired a meeting of the Government


“The primary goal of the budget policy for the immediate future is to ensure macroeconomic stability and to consistently reduce the budget deficit, which will amount to 3.2 trillion roubles in 2009 and should be halved to 1.6 trillion roubles by 2012.”

Mr Putin's opening remarks:

Good afternoon, colleagues,

I would like to start with two issues on our agenda.

This week, the State Duma and the Federation Council made a decision to conduct a parliamentary investigation of the causes of the accident at the Sayano-Shushenskaya Hydroelectric Power Plant.

I would like to remind you that in accordance with law all officials of the Government and federal executive authorities must do their utmost to facilitate the work of the parliamentary commission. I am asking you to regard this matter seriously and responsibly.

Also, I would like to tell you that the Government has drafted a decision on issuing the next tranche of state guarantees amounting to 36 billion roubles to the Agency for Housing Mortgage Lending. These additional funds should help the AHML to continue to develop mortgage lending, and therefore support people and the construction industry.

I can tell you as a reference that 29.7 million square metres of housing was commissioned in January-August 2009, a growth of 1.2% compared to the same period of last year. But - I would like to draw your attention to this "but" - a considerable part of those housing projects were launched last year. We will see what we will ultimately have at the end of 2009. I think the figure will be lower than last year.

We will now address the key issue on the agenda of our meeting today - the draft federal budget and draft budgets of state non-budget funds for 2010 and for 2011-2012.

Today, the economic authorities of many countries have announced that they have overcome recession, or will overcome it very soon.

We also see positive signs of recovery in the Russian economy.

We expect the GDP, industrial production and investment to grow in 2010.

However, I believe and have said so many times, but I want to repeat it again today that we cannot allow unjustified optimism yet.

We must be very careful and, as they say in such cases, conservative. Our policy must be based on undivided confidence in our ability to fulfil the plans we formulate.

We must be prepared for any turn of events, including a negative one.

The primary goal of the budget policy for the immediate future is to ensure macroeconomic stability and to consistently reduce the budget deficit, which will amount to 3.2 trillion roubles in 2009 and should be halved to 1.6 trillion roubles by 2012.

Therefore, additional revenues, which are quite possible, should be channelled above all into cutting the budget deficit, and only in case of an emergency, of dire necessity, should they be used to increase expenditures.

By the way, many goals we have set ourselves can and must be attained primarily with the help of reserve solutions, such as enhanced effectiveness of budget expenditure. We must not do so by simply increasing expenditure.

In the near future, all ministries and departments are to draft and submit special programmes for optimising expenditures. I am confident that you will do this, because spending on the maintenance of ministries and departments is being reduced more radically, I think, than ever in the country's modern history.

We have said before that, when appealing to everyone to save money, we must start with ourselves. The Government can and must do so, but this must not affect the quality of our efforts. The maintenance of quality must be ensured by hard work and improved management.

I would like to say that a mindless reduction of expenditures and the budget would be wrong and harmful for the economy and management.

This would affect social assistance to the people and curtail anti-crisis measures and development programmes. Moreover, "money hunger" may provoke a new round of recession in the economy. This scenario is unacceptable to us.

Surveys conducted by the Central Bank, the Government and the Ministry of Finance show that the money mass is shrinking.

Total expenditures of the federal budget will amount to 9.9 trillion roubles in 2010, which is comparable to this year's spending. No, it is slightly more, as spending in 2009 is expected to be 9.8 trillion roubles.

These resources will certainly help us finance all of our priorities, first of all to significantly increase retirement pensions. Let me remind you that the next indexation is scheduled for December. We will raise the basic part of labour pensions by over 30%. Next year pensions will grow by another 46%, averaging at 8,000 roubles a month.

Overall, the Government will spend an unprecedented 4.4 trillion roubles on pensions, or 10% of the country's GDP. There has never been anything like that in Russian history.

Let me also highlight that the 2006 State of the Nation Address contained proposals of a major demographic programme. As you must remember, I proposed a series of changes then, including the so-called Maternity Capital policy.

The aim of the policy was to support women who decided to have a second child in the family. We also agreed to provide additional support to families for three years after the child's birth. You can probably recall that analysts had a lot of doubt whether these policies would be effective in stimulating population growth. Today we can say with confidence that these measures have produced a tangible effect and helped a number of families.

This year, because of the economic downturn, we have made a decision to give certain population groups an opportunity to use the capital sooner.

And, as early as this year, 70,000 families used their Maternity Capital certificates to repay their mortgages in part or in full.

Starting from next year, Maternity Capital can be used for all of the purposes stipulated by the law, including for buying housing, paying for children's education, or adding it to one's pension savings. The Government has allocated 102 billion roubles for Maternity Capital payments in 2010.

So we can roughly estimate that about 300,000 Russian families will be able to use these funds. Analysts predict that some 70% of the money will go into housing.

We should also soon complete the project to provide housing to those WWII veterans who need it.

Another important housing policy priority for 2010 I would like to emphasise here is providing permanent residence to military servicemen. This year we spent an unprecedented amount for this purpose, over 50 billion roubles - we have never allocated this much money. Next year we plan to spend even more, 81 billion. This will complete the programme in 2010.

The federal budget will retain its role of the most important stimulating tool for economic modernisation. We will continue programmes of infrastructure development and establish innovation-based production facilities. Allocations for these purposes will total around 1.6 trillion roubles.

Out of that sum, 300 billion roubles will go into building roads, and about 240 billion for support of high tech industries.

The Federal Space Programme will receive 67.2 billion, the Rosatom corporation over 53 billion roubles as a Government's property contribution, the GLONASS programme 27.9 billion, civil aviation 22.5 billion, research and teaching personnel training 11.9 billion, and digital TV programme 10.8 billion roubles.

We certainly plan budget allocations for further anti-crisis policies, such as state guarantees to secure corporate loans and export support projects.

We have set aside a 70-billion rouble reserve to be quickly channelled into any additional economic support programme.

Finally, as you know, the Government will submit the budget law to the State Duma before October 1. There will be very little time left before 2010.

Therefore, I would like to ask you now to start working right away on the relevant bylaws and tender documentation, so as to begin state purchases as early as in January.

I am instructing the Government members to deal with all of these issues personally, so as not to procrastinate early next year - you now, the holiday season, the usual slowdown in our work. We can't afford it next year - we have enough problems without it.

Let us get down to business.

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