Russia allocates $45 billion to deal with its slumping economy

The Russian government will allocate 1.5 trillion rubles ($45 billion) in this year's budget to be spent solely in solving the problems of the Russian economy, which has taken a beating due to the global economic crisis.

Russia's leading news agency RIA Novosti quoted Prime Minister Vladmir Putin as saying, "The revised budget will allow almost 1.5 trillion rubles to be allocated for the implementation of anti-crisis measures and allow the state to guarantee fully social obligations."

Of the allocated 1.5 trillion rubles, 379 billion would be given to pension fund and extra-budgetary funds, 150 billion would be provided to the provinces, and another 150 billion would be extended in loans.

35 billion rubles will be spent on housing programmes for WWII veterans and about 100 billion rubles will be kept in reserve for emergencies.

Putin also said that the government will submit to the state Duma, both the anti-crisis allocated fund plan and the adjusted draft budget for 2009.

He wanted the country's economists and public organisations to discuss and debate the new adjusted draft budget and the anti-crisis plan, and come up with some "constructive proposals."

The new plan will be an addition to anti-crisis measures adopted last year worth an estimated total of some 150 billion dollars and comes after consultations with regional governors, trade unions and employers, Putin said.

In October, the Russian government had pumped in approximately $150 billion into its economy after politicians and financial experts urged the government to invest state funds in domestic as well as foreign securities as investors pulled billions of dollars out of Russia on fears over the global financial crisis and tumbling oil prices. (See: Putin unveils Russian bailout package)

President Dmitry Medvedev has often said that the government was slow in handling the economic crisis, which had hit major Russian companies with massive debts and the collapse of the oil market.

Yesterday, Medvedev hit out at Russian oligarchs and said that the government will no longer hand out bailouts to them and their companies unless they come up with viable restructuring plans.

Many of those companies owe billion of dollars to foreign banks and lenders, fuelling fears that these companies will come under the control of foreign banks.

In October, when the Russian government pumped in $150 billion into the economy, it had earmarked $50 billion to refinance borrowings made by Russian companies abroad and $36 billion subordinated loans to major Russian banks to increase the banks capitalization and to solve liquidity problems.

The global economic crisis and floor level oil prices have hit the Russian economy where the number of jobless Russians has reached an alarming figure of 6 million.

To deal with this crisis, Medvedev said that the federal government has earmarked 43 billion rubles ($1.2 billion) in various job creating programs to help the unemployed.