Russia Expected to Reduce Budget Planning Period to One Year

The Financial Times profiles a recent proposal made by Russian Prime Minister Dmitry Medvedev to formulate yearly budgets every year as opposed to the traditional three years. The government’s official reasoning is that fluctuating oil prices make economic planning difficult. The real reason, according to the FT is that Russia is concerned about a looming hike in US interest rates by the Federal Reserve. The expected result of the interest rate hike is expected to lead to a more valuable dollar. This is problematic for Russia as it would make it even more difficult to rebuild its foreign reserves.

Due to its current economic troubles, Russia has already used up more than $130 billion of its $500 billion in foreign reserves in order to slow the devaluation of the ruble, which has lost significant value vis-à-vis the dollar over the past eight months. While some expect a higher USD interest rate to have significant adverse effects on the Russian economy, an analyst from Moscow-based Renaissance Capital indicated that a boost in interest rates may lead to more minor consequences such as higher capital outflow and a “little bit more pressure” on the ruble. The US Federal Reserve has not indicated when it will issue interest rate hikes although a decision is expected in the near future.

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News Briefs:

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  • Russia has requested that Bulgaria explain why it has repeatedly rejected Russian requests to fly over its airspace in route to Syria. One Russian deputy foreign minister insisted that if Bulgaria has doubts as to Russia’s intentions he should simply inquire as to the purpose. Bulgaria has rejected Russian requests to fly over its airspace due to what the Bulgarian foreign ministry characterized as “serious doubts about the cargo of the planes.”
  • Tajikistan has arrested seven more member of an alleged anti-government movement under the command of fugitive Deputy Defense Minister Abdukhalim Nazarzoda. The arrests were made following a confrontation between Tajik security services and members of the armed group in which one of its members was killed. Tajik military sources now claim to have killed 18 opposition fighters and detained 70 others. Nazarzoda’s whereabouts are still unknown.

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