Russia’s Finance Minister yesterday called for a cut in planned spending to weather an economic crisis, warning of a drop of more than $45 billion in revenues this year if the average oil price is $50 a barrel.

In comments underlining the government’s growing concern at the downturn, Finance Minister Anton Siluanov said all budget expenditure should be cut by 10 per cent except defence, a priority for President Vladimir Putin.

Adding to the gloom, Economy Minister Alexei Ulyukayev said there was a “pretty high” chance that Russia’s credit rating would be downgraded to junk.

A steep fall in the value of the rouble, low prices for its main oil export and Western sanctions over Moscow’s role in the Ukraine crisis have hit Russia’s economy hard, and Siluanov said overall expenditure in 2015 must increase by 5 per cent, not the 11.7 per cent previously budgeted.

High chance that country’s credit rating may be downgraded to junk status

“The state cannot have the kind of spending it used to have with economic growth ... (and) with the oil price at $100 per barrel,” Siluanov told a conference of state officials, economists and business chiefs.

But with Russia being starved of investment, pressure is mounting for stronger government action to pull it out of the current crisis.

“We need a radical turn in economic policy,” said German Gref, the head of Russia’s biggest bank, Sberbank, demanding a “breakthrough” to improve the dire investment climate, stymied by State pressure on business and weak rule of law.

Ulyukayev also highlighted the problems facing small and medium businesses, saying they must be supported to try to spur Russia’s oil-dependent economy, which the World Bank expects to contract by 2.9 per cent this year.

“The global economy will never again be what it used to be in 2000-2007 and the situation in Russia will never be the same,” Ulyukayev said.