Putin's promise to not cut government spending only lasts 2 weeks

Today the Russian Finance minister Anton Siluanov proposed cutting all government spending by 10% across the board, except military spending. Many other government officials appealed for calm as the level of government spending cuts is much higher than expected. Actually, Putin himself said the government wouldn't cut spending only a few weeks ago in his New Years speech.

www.nytimes.com...

It appears that Putin was playing a semantics game in his speech, as the overall Russian budget spending will in fact increase. The large increases in Military and infrastructure overshadow the possible 10% cuts to every other department. Russia is in the middle of one of the biggest military modernization plans the world has seen with massive military budget increases.

At $50 per barrel for Oil Russia has a $45 Billion US hole in it federal budget. Oil was on $47 per barrel however so the hole in the budget could be even worse. With dwindling reserves due to the propping up of the Ruble and Western sanctions causing billions of international refinancing to be picked up by the Federal Government there is little else the Russian government can do. Standard and Poor's credit rating for the country is expected to be lowered to 'Junk' status within the week which will effectively cut the government off from international borrowing at reasonable rates.

Current predictions for the Russian economy in 2015 are all negative with it's GDP shrinking almost 3% and inflation running around 17%. Both predictions have been getting worse and worse over the past few months.

As Putin himself might say, The Bear is going to have to live in the forest and survive on berries for awhile.

Edit: Scrap that

Gosh if only our government had the fortitude to cut spending in every department 10% across the board.

www.chicagotribune.com...

Russia plans to be in the bond market in an effort to get more money, even despite the high rates that only continue to go up. They have cancelled many bond offering since December due to unfavorable conditions. I can't see the downgrading to junk status helping rates at all.

The financial situation in Russia is getting critical. Their reserves are being heavily tested and when they run out the music stops with no chairs for anyone to be safe on.