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Russia to spend 9 bn euros to tackle financial crisis: minister

The economy minister of recession-hit Russia on Thursday pledged nearly $10 billion to tackle the country’s financial crisis, as the low oil price weighs heavily on growth.

Alexei Ulyukayev earmarked 750 billion rubles (nine billion euros, $9.8 billion) in anti-crisis measures, of which 310 billion rubles are loans to regional authorities already allocated in the 2016 budget.

Russia’s energy-reliant economy shrank by 3.7 percent in 2015 and is set to continue suffering in the current year, weighed down by systemic problems that have been exacerbated by Western sanctions over Ukraine and the low price of oil.

President Vladimir Putin has ordered that the budget deficit should stay within three percent of gross domestic product.

However the current budget is calculated with oil at $50 a barrel and balancing the books will be a tall order unless the price climbs back to prior levels.

The oil price is currently hovering around $30 per barrel.

It was not clear from Ulyukayev’s remarks where the government plans to draw the anti-crisis money from.

The country has amassed two “rainy-day” cash funds but they have been depleted, including by efforts to prop up the ruble, and some officials conceded that they could run out by the end of the year.

Russian newspapers reported that the anti-crisis plan is split into four sections: helping the regions, supporting key economic sectors like agriculture and auto manufacturers that have been hardest hit, social measures and structural reforms.

While the government has said it seeks to slash spending by 10 percent this year, large parts of the budget, notably the military and social welfare like pensions, have been ring-fenced from any cuts.

Also complicating matters are upcoming parliamentary polls in September, with authorities keen to stave off any public discontent over the dire economic situation.

Proposals in the anti-crisis plan “appear heavy on the social support and seem to be dictated by electoral concerns rather than a strategic goal of improving productivity,” said a note from Alfa Bank analyst Dmitry Dolgin, concluding that the plan “is unlikely to improve the overall mood in the economy.”