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President of Russia Dmitry Medvedev: Good afternoon Alexei Leonidovich!

You are preparing amendments to the federal budget. I would like you to tell me how the work is going. In April and May we had a series of meetings on this issue. In addition, I have signed several decrees concerning social programmes. I would like to know how all these decisions are being taken into account in the documents which are now being prepared.

Deputy Prime Minister and Minister of Finance Alexei Kudrin: The government has prepared amendments to the 2008 budget. This is due to the fact that economic growth this year is higher than expected.

Dmitry Medvedev: What are the figures for economic growth?

Alexei Kudrin: We are predicting growth of about 7.6 percent this year. Furthermore, we should certainly take inflationary pressures into account and protect all the public workers, since certain types of services or costs to the public institutions involved grow in relation to rising prices in the market.

Therefore, we have refined our forecast of economic development for this year. We are anticipating additional revenue of a trillion rubles this year. But those revenues that are not related to oil and gas, that we can use for spending without increasing the danger of inflation, amount to some 120 billion rubles.

This is sufficient to accommodate all the major decisions taken by the government cabinet and the President and to specify the main items of budget expenditure that will enable us to have a normal year this year. Therefore the decisions that have been taken into account in these amendments include the Presidential decree to ensure housing for war victims, those wounded during military operations and participants in the Great Patriotic War.

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In addition, there is an entire section of amendments to support agriculture. It is connected with the situation on world markets and the need to support Russian farmers to expand production of key agricultural products. Therefore, first of all 31.5 billion rubles will be added to the capital of Rosselkhozbank [Russian Agricultural Bank] to facilitate the provision of both short- and long-term loans to support the grain and livestock sector.

Dmitry Medvedev: These are loans with the partially offset lending rate?

Alexei Kudrin: In addition, these loans will receive partial compensation rates from the federal budget. Such activities will be financed together with the regions of the Russian Federation. In addition, 10 billion rubles will be designated to compensate farmers for the increase in the cost of feed, so that during this difficult time of price increases we do not lose livestock but rather increase the pace of its development. Eight billion rubles is to be allocated this year for the purchase of fertilisers for crop production.

Dmitry Medvedev: This is a very important issue, especially in view of the fact that in the past two and a half years we have made large-scale investments in agriculture, and it has grown accordingly. And at a time when the world food market is in difficulty, we need to support our producers so as not to put at risk all the positive things that we've done recently.

(At this point the Minister referred to the amendments linked to support activities in the regions of the Russian Federation in the field of social policy, as well as to the performance of state obligations for claims.)

Dmitry Medvedev: This is also a very important issue. Not long ago, I held a meeting on judicial matters, and we talked about how justice must not only be fair but effective. The efficiency of the justice system depends on making sure that levy of execution takes place on time. So what you're describing is in effect an attempt to move in this direction.

Alexei Kudrin: The new Budget Code significantly streamlined the procedure and responsibility of ministries and departments, including the Ministry of Finance. I think that by the end of this year we will eliminate all delays and ensure that citizens' rights, those that have been upheld by the courts against the state, will be given all due protection promptly and definitively.

Dmitry Medvedev: The state is in effect as much the party to be charged as anyone else, and it is obliged to execute those solutions that have been adopted in full. It's a good thing that the funds have been set aside for this.

Alexei Kudrin: There are a number of undertakings linked to specific investments in those facilities, especially health care, where we can accelerate the introduction of major health and social centres. These facilities that the government and the President have discussed are located in different regions of the Russian Federation (Yaroslavl, Astrakhan, etc.).

Dmitry Medvedev: Am I right in assuming that these proposals that you have prepared are the ones you will be examining at the meeting of the Budget Commission tomorrow?

Alexei Kudrin: Tomorrow we will make these proposals to the Budget Commission, which Vladimir Vladimirovich Putin oversees. Next week we will consider the proposals at a cabinet meeting and take them to the State Duma.

Dmitry Medvedev: I would like to be clear: all our calculations, as I understand it, are based on the fact that these changes in the state budget will not affect macro-economic indicators, those relevant to our own economy currently and those we expect to receive at the end of the year.

Alexei Kudrin: Together with the Central Bank we control the basic parameters of monetary policy. I can say that at the moment they are significantly better than they were at this time last year. We have succeeded from the start of the year until now in keeping the growth of the money supply in line with the guidelines set by the government and the State Duma. This will result in a decline in inflation rate in the country over the next six months and next year. Therefore, these costs will in no way affect the principal measures that we took to reduce inflation.

Dmitry Medvedev: Keeping inflation under control is the government's most important job.

Alexei Kudrin: I believe that we can manage.