Russia pledges $40bn for crisis war chest

By bne IntelliNews June 21, 2012

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The Russian cabinet has earmarked $40bn to directly finance anti-crisis measures in 2012-13 should the Eurozone crisis continue to escalate, Finance Minister Anton Siluanov said on June 19. Whilst the scheme aims to make the state's response more timely than in 2009, the volume of funds pledged is significantly below the $150bn pumped into the economy last time around.

Speaking in his first interview with the Western press since his appointment in 2011, Siluanov told The Financial Times the government has agreed to spend up to RUB800bn ($25bn) on meeting any potential shortfall for budget obligations in 2012, with another RUB500bn earmarked in next year's budget.

The funds will be used to support "socially needy people" and "systemically important enterprises," the official said. In addition, anti-crisis mechanisms also envisage the revival of a scheme, proposed but not implemented in 2009, to issue government bonds to recapitalize banks in exchange for shares.

"The problem with the last crisis at the beginning of the 2009 was that we spent time getting into the swing of it - we were passing normative acts and preparing anti-crisis commissions and changes to the budget, and because of this we lost a significant amount of speed in carrying out the measures," Siluanov commented. "We lost the chance to react quickly."

However, analysts are under-whelmed with the size of the fire-fighting funds. "We see no real news in what Siluanov has said, as the $25bn for 2012 is basically the result of cheaper oil on the budget, while the $15bn for 2013 is a relatively small sum," UralSib writes.

"In comparison, in 4Q08-2009 the Russian government used RUB4.5tn ($150bn) of its reserves to support the economy," they add. "This shows that this time, if there is another large crisis wave, the government response is likely to be constrained. In essence, the relatively large budget that Russia currently enjoys is already a big anti-crisis measure."

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