MOSCOW, April 29 (Reuters) - The Russian government approved fiscal guidelines on Tuesday calling for budget surpluses over the next two years despite planned tax cuts in 2004-2005 and the creation of a stabilisation fund.
The plan will provide the basis for compiling Russia's 2004 draft budget, scheduled for discussion at a cabinet meeting on June 5.
"The document was backed by all members of cabinet. All major indicators were approved raising almost no questions," Alexei Kudrin told reporters after the cabinet meeting.
Under the plan Russia should run a budget surplus of 95 billion roubles ($3.06 billion) or 0.6 percent of gross domestic product (GDP) in 2004 and 0.9 percent of GDP in 2005.
Russia's 2003 budget forecasts a budget surplus of 0.6 percent of GDP or 72.15 billion roubles, but the latest forecast provided by the finance ministry showed the surplus could rise to 188 billion roubles this year.
"I like the fact that they are cutting taxes at the expense of the budget surplus because I don't see why the government should run a big fiscal surplus, when by and large foreign debt payment issues have been solved," said Alexei Moiseyev, an analyst at Renaissance Capital.
The government's plan also takes into account tax-cutting measures to spur growth and narrow the gap with western economies.
Russia plans to eliminate a sales tax and reduce value added tax to 18 percent from 20 percent in 2004 to stimulate domestic demand.
It also intends to slash social security taxes paid by businesses to 26 percent from 35.6 percent in 2005 to help boost investment.
Kudrin said the government forecasts the average price for Russia's benchmark Urals crude at $22 per barrel in 2004 and at $22.5 in 2005 but he also said the country could keep its books balanced at $20 per barrel.
"I cited the forecast of the IMF (International Monetary Fund) to the cabinet. According to their estimates the average price for Brent crude will be $23.5-23.9 per barrel next year which is very close to our estimate for Urals of $22 per barrel," Kudrin said.
Kudrin said the government planned to channel any additional revenues above an oil price of $20 per barrel into a special stabilization fund starting next year. The fund would be used to cover revenue gaps in the event of a plunge in crude prices.
The fund is expected to have 324.3 billion roubles by the end of 2004 and 474 billion roubles by the end of 2005 -- equal to 2.1 and 2.7 percent of Russia's planned GDP, respectively.
Peter Westin, an economist at Aton Capital, praised Russia's goal of keeping the budget in the black for at least another two years but said he wanted to see whether the government would persevere with planned public spending cuts ahead of December parliamentary polls.
"We expect further wage hikes for state sector workers and additional handouts to the defence and security services as being among the factors likely to push expenditure beyond the government's targets," Westin said.
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