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Moscow - Russia announced a $35bn "anti-crisis" spending plan on Wednesday to bail out an economy battered by Western sanctions and falling oil prices, but gave few details of the deep cuts it said would be enacted this year to pay for it.
The 2.34trn rouble spending plan includes 1.55bn roubles to support banks, most of which was already announced last year and which many analysts say is still a fraction of what Moscow will have to spend to keep its lenders afloat.
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The plan focuses mainly on bailing out banks and big companies to help them weather the immediate impact of the crisis, at the expense of long-term development programmes. Extra money would also be spent to increase pensions in line with higher-than-expected inflation.
"This plan is something like a cushion to avoid a rapid deterioration in Russia and support several of the most important economic agents (and provide) social support," said Sberbank chief economist Yulia Tseplaeva.
President Vladimir Putin has ordered that defence and social spending cannot be cut, underscoring his focus on preserving Russia's international might and social stability.
Despite these constraints, Finance Minister Anton Siluanov said on Tuesday that the anti-crisis plan would not add to total budget expenditures, because of budget reserves and cutbacks elsewhere.
The plan said the government would cut "the majority" of its planned expenditures by 10% in 2015, except for defence, social spending and debt repayments, with a view to balancing the budget by 2017. But it gave few details on those cuts, beyond saying that some long-term investment projects would be delayed.
Ivan Tchakarov, Russia economist at Citibank, said that the plan was necessarily vague, as Moscow has yet to revise its budget and macroeconomic forecasts for this year.
"It's a typical government-led programme. It focuses on subsidies," he said. "I haven't seen any particular measure that strikes me as a structural reform, it's just talk."
Some major items in the plan are being financed from the National Wealth Fund, an $80bn sovereign fund that had previously been assigned to fund infrastructure projects.
Priority measures
Among the priority measures, the largest single item is a 1trn rouble programme to recapitalise banks through the issue of government bonds, which has already been funded from last year's federal budget.
Banks will get a further 550bn rouble from the National Wealth Fund. This includes 300bn roubles for Vnesheconombank, the state development bank, to increase "lending to organisations of the real sector".
Many analysts think this is still a fraction of what Russia will have to spend to keep its banking sector afloat as businesses lose the ability to service their loans and banks are hit by much higher financing costs.
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Citibank's Tchakarov said that the support measures were narrower than similar ones enacted in a previous crisis in 2008-2009, reflecting more limited resources this time.
"Now they're much more selective, with support for key strategic enterprises, which is why I think this time we are going to see some corporate and bank defaults," he said. "You cannot support everyone in the current environment."
The plan "isn't something to get too excited about", he added. "But at least they still have some money to spend, some buffers to use."
Among the uncosted items, the plan said the government would collect proposals by January 30 for creating a "bad bank" to ring fence problematic banking assets.
The plan includes 200bn roubles in state guarantees of loans of bonds needed "for carrying out investment projects," as well as other goals approved by the government such as debt restructuring.
The federal government will lend 160bn roubles to help regional governments, and 188bn roubles were allocated to raise pensions in line with inflation.
Smaller or uncosted items in the plan included subsidies and tax breaks to industrial enterprises, small businesses and agriculture.
