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Liquidity Stumbles in Govt’s Corridors

February 08, 2008 | www.kommersant.com

The liquidity risks in Russia’s financial system could be further aggravated by problems with the budget execution in 2008. Quite a few budget regulations are somewhere en route from Finance Ministry to the government. Therefore, the budget curtain money will reach economy only by summer of 2008, and economy will probably face real shortage of government’s spending instead of the scheduled growth in the first quarter of this year.

The budget spending is likely to be below the scheduled one at the start of this year, signaled the report that Finance Ministry has recently released and that describes the progress in elaboration of regulations required to execute the three-year budget and implement the Budget Code that took effect January 1, 2008. It emerged that there is no chance to benefit from quite a number of regulations. Although the Finance Ministry has submitted them to the government, they still need the sanction of cabinet.

The delay has frozen the funding of some budget items. In the Finance Ministry, they were unable to give the actual amount frozen as a result of it, as it hasn’t been calculated yet. According to the data available to Kommersant, the matter at stake is dozens of billion rubles a month.

Exactly the difficulty of agreeing positions of Finance Ministry, Economic Development Ministry, Regional Development Ministry, Transport Ministry and Agriculture Ministry, on the one hand, and the government, on the other, is the vital condition for emergence of the so-called budget curtain at the end of the fiscal year, when the above ministries are spending the money at large.

But formation of this curtain early in the year gives rise to apprehension. The analysts forecast continuation of liquidity crisis in Russia’s bank system because of the possible capital outflow in the first and the second quarters.


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