Putin's social initiatives will cost billions - paper

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MOSCOW, September 6 (RIA Novosti) - President Vladimir Putin instructed the government to solve many social issues in the next three years, a respected daily reported Tuesday.

Izvestia wrote that the government would have to find money to raise the wages of doctors, teachers, scientists, teachers and soldiers, to triple housing construction and connect schools to the Internet.

According to the paper, the Finance Ministry immediately reported that the budget had about 100 billion rubles ($3.5 billion) to implement the president's social initiatives. However, the majority of experts said this money would not be enough even to cover wage raises and education spending.

Igor Nikolayev, senior strategic analyst with FBK, an audit and financial consultancy, said higher public sector wages would require 400 billion rubles (about $14 billion) from the federal budget.

Yaroslav Kuzminov, the head of the Moscow-based Higher School of Economics, said budget allocations for education would have to be increased from 3.2% of GDP to 4.5% to achieve at least the Soviet education levels. According to the Higher School of Economics, at least 140 billion rubles (almost $5 billion) need to be spent on education.

One of the most expensive social initiatives of the president is budget support for the mortgage program.

Alexander Borodai, the deputy chairman of the public council of the minister of regional development, said apart from in a mere four or five cities, no mortgage support program was in operation in Russia. "Nobody can say today how much mortgage support will cost the federal budget," he said.

The State Committee for Construction and Housing (Gosstroi) said new housing worth $15 billion had been commissioned in Russia in 2004. Therefore, tripling housing construction would cost at least another $5 billion, the newspaper wrote.

Yevgeny Gavrilenkov, the senior economist with Troika Dialog, a brokerage and investment company, said in turn that the president's initiatives were well within the 2006 draft budget and therefore would have no extraordinary macroeconomic effect. However, he added that budget expenditures would be 22% higher in 2006 anyway. "But the economy will be unable to keep up with this pace," Gavrilenkov said. Consequently, inflation will exceed the government forecasts [of 7-8.5%] and hit 10-11% next year, he told Izvestia.

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