Mikhail Kasyanov On Three Versions Of 2002 Situation With Dropping Oil Prices

The Russian government has worked out three variants of next year's situation with dropping oil prices, told journalists Russian Prime Minister Mikhail Kasyanov on Friday. Kasyanov promised that all budget expenditures, including social spending, "would be covered 100%" no matter which of these variants prevails. According to the government's estimates, the price of oil may slump down to $23, $18 or, at worst, $15 per barrel. "Nothing terrible is going to happen in either of these cases," assured the premier. "The situation is fully under control, all possible precautions were considered." Should the oil price drop to $23, the country's currency reserve will increase by $4-5 billion and the financial reserve will reach $3-4 billion, which means there no foreign borrowings will be needed. Inflation will not exceed the predicted limit, with the dollar rate rising to 31.5 rubles maximum /at this moment, the dollar rate is close to 30 rubles/. In this case, the additional guaranteed expenditures in the amount of 37 billion rubles will be met. The variant with oil prices dropping to $18 will not allow any increase in the currency reserve, which means the financial reserve will amount to $2-3 billion. No borrowings will be needed, but inflation will probably slightly exceed 13%. This variant will not allow the country to meet additional expenditures. The "worst" variant, the one that envisages $15 per barrel, will account for a $5-6 billion reduction of the currency reserve and require $1 billion of foreign borrowings. Inflation will reach over 13% but won't exceed 18%. The lack of financial reserves will account for the inability to meet additional expenditures. "In this case, the country will have serious difficulties in entering the year 2003 and will probably need $2 billion of foreign borrowings, including $1 billion in restructured debts," remarked Kasyanov. He also stressed that the question of sequestering the salary of workers of budgetary institutions, salary indexation and pension raise did not even arise. "This will be done in any case," he said. When it comes to the social sphere, "sequestration is out of the question," he said. "That's the decision of the president and the government."