President Putin promises more social spending

Moscow, April 27:

President Vladimir Putin promised billions of dollars to spur on the ambitious social and infrastructure projects undertaken during his tenure, saying that Russia has fully recovered from its precipitous economic fall following the Soviet collapse.

A top Kremlin economic adviser said the new projects could ultimately cost nearly $25 billion over several years.

In his speech on Thursday, Putin said more money had to be put into improving the lives of Russian, many of whom have been left behind during the crash in the 1990s and the recent oil-fueled economic recovery. Many find themselves with insufficient pensions and unable to afford to move out of deteriorating Soviet housing.

Average incomes had doubled since 2000, he said, adding that Russia became the world’s No 1 oil producer in 2006.

“Now Russia has not only completely overcome the long fall in its production, but has become one of the 10 largest economies of the world,” he told lawmakers and top government officials.

In the seven years of Putin’s presidency, analysts estimate that Russia has earned $750 billion from sales of oil and gas, amid record world prices.

Despite pressure from some corners of the Cabinet the Finance Ministry has resisted the temptation to spend that bounty, instead channeling windfall oil profits into a stabilization fund to cushion any possible price drop as well as to avoid spiking inflation.

The country’s currency reserves are today the world’s third largest and the stabilization fund is at $108 billion (euro79 billion) - analysts say Russia is at no risk of a sudden return to the economic ignominy of its 1998 default. Many argue that more state revenues should be used to modernize the economy - large parts of which are still dilapidated or antiquated.

In Thursday’s speech, Putin pledged a 250-billion ruble ($10-billion) fund to repair housing and resettle residents, saying it was “inadmissible for a country with such reserves accumulated from its oil and gas revenues” to let millions live in “slums.” To large applause, he suggested that part of the bill could be footed from money raised in the bankruptcy auctions of the OAO Yukos oil company.