Russia govt prepares for worst and sets aside EUR5bn

By bne IntelliNews January 20, 2012

bne -

The Russian government has secretly frozen around RUB200bn, or €5bn, on the accounts of the federal budget, for emergency spending in the event of a second wave of the crisis, writes Vedomosti.

According to Vedomosti's high-ranking government source, the government has been preparing for a second wave of the crisis since the autumn, and a task force was formed to develop defensive measures. The task force included former finance minister Aleksei Kudrin, according to the source.

The secret weapon appears to be reassignment of up to RUB200bn of budget expenditure, and thus the finance ministry has suspended the transfer of this amount of funds to a number of budget-funded entities, at least for the first quarter of the year, says the source. Other sources say 3% of all funds due to be transferred to budget-funded entities have been withheld. This will not, however, affect salaries.

In the event of a crisis, the withheld money will be spend instead on immediate aid to the economy such as support for employment, support for the unemployed, support for the automobile industry, and in the case of increased inflation - indexation of salaries, writes Vedomosti.

This would seem to point to the government understanding the seriousness of the situation and wanting to respond quicker than it did in 2008. This is especially important considering the presidential elections in March and the risk a sudden Lehman Brothers-style meltdown as early as the first quarter.

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