Reduction of dependence on foreign business trends will be one of Russia's most important strategic tasks next year, believes Russian Deputy Prime Minister, Finance Minister Alexei Kudrin. When presenting the 2004 draft budget to the State Duma, he said that at present proceeds of oil, oil products and gas sales made 35 per cent of the federal budget.
The main mechanism of protecting the budget from world oil prices fluctuations will be the set up of a stabilization fund, Kudrin said.
"The stabilization fund will forever secure us against such situation as the 1998 rouble devaluation and default caused by fallen oil prices," the Finance Minister believes.
By the end of 2004 the stabilization fund is expected to amount to 83.4 billion roubles (about $2.7 billion), he added. The fund will be filled from three major sources: remains in the federal budget of the current year, proceeds from oil sales at a price exceeding $20 per barrel, as well as the extraction tax. The 2004 oil price forecast in the budget equals $22 per barrel.
Yet another peculiarity of the 2004 budget is "a balanced budget system in conditions of a significantly reduced tax burden," Kudrin believes. The draft budget envisages reduction of the value added tax from 20 to 18 per cent, as well as abolition of the sales tax.
On the whole, next year the tax burden on the economy will be reduced by 1 per cent of the GDP, with main tax cuts occurring in processing industries, he emphasized. This will allow allocating additional 150 billion roubles (about $4.9 billion) to develop the economy's processing sector.
In general, the 2004 budget creates favourable conditions for economic growth due to structural reforms, increased efficiency of state management and investment in the Russian economy, the Finance Minister concluded.