Moscow tells regions to save money
Russian regions will in 2009 have to cut spending with an average of 20 percent. That will hurt both planned investment projects and social obligations. In the Republic of Karelia, the governor expect the regional economy to shrink with 30 percent next year.
The federal Ministry of Finance believes regional revenues from income taxes next year will drop 25-30 percent. Taxes from enterprises are expected to shrink with 5-10 percent. The income and enterprise taxes together account for 70 percent of the regions’ revenues, newspaper Vedomosti reports.
The regions dependent of big metallurgy and oil processing companies will be the ones worst affected, Head of the Institute of Public Finance Reform, Mr. Vladimir Klimanov, says to the newspaper.
The lower revenues could seriously hurt the regions’ ability to follow up investment projects. It might also lead to cuts in social spending, with subsequent consequences for the regional populations.
Governor of the Republic of Karelia, Sergey Katanandov, admits that he expects a 30 percent cut in the regional 2009 budget and economy, and that this will be a serious test for all levels of power in the region.
At the same time, the governor calls on municipal authorities to keep quiet about planned budget cuts for 2009, in order not to spur “panic” in the local population, Stolica.onego.ru reports.
