Painting a grim picture for Russia's economy, President Dmitry Medvedev said on Monday the budget deficit could cross seven per cent of gross domestic product this fiscal and called for austerity measures to curb government spending.
Presenting his first budget policy before the government of Prime Minister Vladimir Putin, Medvedev said for the first time in a decade Russia would be spending more than its revenue.
"Currently the country and its economy are in a complex situation. Global crisis is far from over, that is why in 2009 we expect a deeper drop in GDP than anticipated. The budget deficit will reach at least 7 per cent of gross domestic product," Medvedev said.
Later vice-premier and Finance Minister Alexei Kudrin said he was expecting deficit equivalent to 7.4 per cent of GDP.
Unlike in the past, when the President used to send a written budget policy to the State Duma (lower house of parliament), Medvedev personally presented the budget at the expanded meeting of the cabinet in presence of prime minister and chairpersons of both the houses.
He instructed the government of Prime Minister Putin to prioritise the country's budget, take a very conservative approach to spending, and adopt austerity measures.
Medvedev also unveiled the Kremlin's ten point budgetary policy in 2010-1012, which involves support for the banking and financial system, through fulfilment of social obligations.
He underscored the oil windfall reserve fund would help finance the crucial national projects for the improvement in the living standards of common Russians to meet government's social obligations and innovative modernisation of the economy.
Finance Minister Kudrin said the current reserve fund will be exhausted next year and the government would have to borrow $7 billion in the market.