In light of the need to optimize federal spending, the participants of the meeting discussed various approaches to the distribution of funds between different levels of government in 2010-2012.

"An analysis of the current situation and the relevant short-term forecasts dictates the need to adopt a very strict federal budget for 2010," said the First Deputy Prime Minister, opening the meeting.

In addition, Viktor Zubkov stressed that there would be no cuts in overall budget spending (9.8 trillion roubles in 2010 compared to 9.7 trillion in 2009). "This is the fundamental position of the Government," he said.

The First Deputy Prime Minister said the deficit target for 2010 was 3.2 trillion roubles, or about 7.5% of GDP. "This is the maximum deficit we can afford. If we are to preserve macroeconomic stability, as early as 2011 and 2012 we must gradually but substantially reduce it to 3% by 2012," noted Mr Zubkov.

He declared the fulfilment of the Government's social obligations to Russian citizens and the creation of conditions for post-crisis economic recovery and development as priorities for spending.

"A similar system of priorities should be adopted at the regional level," Viktor Zubkov stressed.

He specifically mentioned the decisions to subsidise agriculture and the lumber industry. Funding to subsidise the interest rates on loans to agricultural producers will increase to 80 billion roubles in 2010, while federal and regional governments will continue to share the cost of agricultural insurance. Moreover, 2010 will see the doubling of government funds to subsidize the interest rate on loans taken out as to purchase seasonal buffer stocks of timber.

The First Deputy Prime Minister announced that in order to solve the problem of current deficit spending on priority areas, the practice of granting the regions low-interest loans (at one fourth of the Central Bank refinancing rate) for a term of up to three years would continue. In 2010, the total amount of money allocated for these purposes will be 125 billion roubles. The figure for 2009 was 150 billion roubles.

In order to increase the revenue return of the consolidated budgets of the Russian regions and compensate for the decrease in Government co-financing in 2010, some taxes that support regional and local budgets will be raised. In addition to the vehicle excise and government state duties, this will apply to excises on wine, alcohol products (with ethylated alcohol content of up to 9%), beer, and petroleum products.

"All of the above measures will provide the regional budgets with additional 96.6 billion roubles in revenue in 2010," revealed Viktor Zubkov. Additional consolidated budget revenues will exceed additional spending by more than 20 billion roubles. "As for the regions in the Siberian Federal District, the overall balance after all these changes will be 6.1 billion roubles in the black," the First Prime Minister said.

Viktor Zubkov said that a system of oversight and evaluation of the quality of budget management in the Russian regions would be put in place in order to improve budget management, expand the use of performance-based budgeting principles, and make the budget process more transparent. The system will measure success according to indicators for agriculture and the lumber industry. Using incentives and sanctions, the system will reward and punish Russian regions according to the quality of their financial management. Special attention will be paid to the timely fulfilment of public obligations of the Russian regions.

Viktor Zubkov urged the heads of regions to do more to restructure their budgets, to shed superfluous and ineffective institutions and enterprises, and to make use of autonomous enterprises wore widely.

"The quality of budget planning in the regions and municipalities needs close attention. The system of priorities will have to be more strictly defined and secondary and less urgent spending commitments will have to be given up. This is the only way to ensure balanced regional budgets and quality management of the budgeting process at the regional and local levels," concluded the First Deputy Prime Minister.

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During his official visit to the Republic of Buryatia, Viktor Zubkov also visited a livestock farm in order to acquaint himself with the Buryat national experience of livestock breeding.