January 12, 2016 / 11:26 AM / 3 years ago

UPDATE 1-Hit by oil price, Russia imposes 10 percent cuts on government again

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By Darya Korsunskaya

MOSCOW, Jan 12 (Reuters) - Under pressure from the falling global oil price, Russia is requiring government departments to cut spending by 10 percent, repeating a policy it also imposed in 2015, two government sources told Reuters.

The cutbacks will exclude several areas of government spending, including public obligations such as pensions, and pay for government employees.

Energy giant Russia is under pressure to find spending cuts as the international oil price has plunged towards $30 per barrel, a major problem for the federal budget that relies on oil and gas taxes for almost half its revenues.

Under the plan, which was approved at a meeting chaired by Prime Minister Dmitry Medvedev in December, government departments have until Jan. 15 to submit proposals about where the cuts will fall, one of the sources said.

If they fail to do so the finance ministry will decide which items to cut.

The savings are expected to amount to 700 billion roubles ($9.16 billion).

Under the 2016 budget approved in October, federal budget expenditures were projected at 15.8 trillion this year, up from 15.5 trillion in 2015, with the federal budget deficit projected at 3 percent of GDP.

However, that plan was based on the Urals oil price averaging $50 per barrel in 2016, an assumption that President Vladimir Putin has since described as “unrealistic”.

A similar plan for government departments to cut their spending by 10 percent was also approved for 2015, but as with the latest plan large areas were excluded.

Government ministries eventually agreed to cut a trillion roubles from their expenditure plans in early 2015, but the introduction of new spending meant a revised budget approved in April cut overall spending only by 298 billion roubles.

Final expenditures for last year are now expected to be nearly 15.5 trillion roubles, similar to the original budget plan. ($1 = 76.4250 roubles)

Reporting By Darya Korsunskaya, writing by Jason Bush Editing by Jeremy Gaunt.

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