UPDATE 1-Russia still debates budget spending cuts

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MOSCOW, Feb 25 (Reuters) - Russia needs to cut earlier planned budget spending by 1 trillion rouble ($27.76 billion) in 2009 to meet its deficit target and proceed with anti-crisis spending, the finance minister said on Wednesday.

“A deficit of eight percent (of gross domestic product) is a maximum amount we can afford while keeping our inflation forecast of 13-14 percent,” Alexei Kudrin told reporters.

Russia was forced to announce a large budget revision after the price of oil plunged creating a gap of 42 percent in budget revenues this year compared to the earlier plan.

Analysts say infighting between different ministries for more cash in the new budget and a growing queue of crisis-hit corporates and banks seeking state support are the main reasons why Russia has no new budget two months into the year.

The fight is likely to continue as Kudrin was not yet able to provide details of the upcoming cut and even avoided calling it a spending reduction. “We need to proceed with an optimisation of the federal budget,” he said.

He said budget spending in 2009 would total 9.5 trillion roubles ($263.7 billion) as opposed to the earlier planned 9.0 billion.

The new spending plan will include 1.5 trillion roubles worth of anti-crisis measures, banking sector aid, help to regions and social support package.

Kudrin said banking sector support will include 300 billion roubles in first-tier capital injections and 255 billion roubles in subordinated loans.

Budget revenues are projected to fall to 6.349 trillion roubles based on the oil price forecast of $41 per barrel instead of $95 in the previous budget.

The government would spend 2.7 trillion roubles from its reserve fund to cover the deficit. (Reporting by Gleb Bryanski; Writing by Dmitry Zhdannikov; Editing by Victoria Main)