Russia's Kudrin warns parliament on more spending

MOSCOW, Sept 22 (Reuters) - Finance Minister Alexei Kudrin cautioned Russian deputies on Thursday that next year's budget pushed spending increases as far as the economy could handle.

The 2006 draft budget is expected to breeze through its first reading later on Thursday, since it has the backing of the pro-Kremlin United Russia party, which dominates the Duma lower house of parliament.

But some Duma deputies have called for Russia to redistribute more of its oil windfall around a country where the average wage is still only $300 a month and underinvestment is a persistent problem.

The budget forecasts an enviable surplus of 3.2 percent of gross domestic product, but Kudrin was forced to jack up spending by more than he would have liked to meet ambitious investment and public sector pay commitments.

"The increase in spending in 2006 is as big as it can be. A further increase could provoke inflation, which is itself a burden on our citizens," Kudrin said.

The government is now struggling to cap inflation at 11.0 percent this year, having started January with a target of 8.5 percent. Prices are a touchy subject in Russia where people's savings were wiped out in the shocks of the 1990s.

Earlier this week Russian oil majors promised to freeze domestic gasoline prices amid growing discontent over the soaring cost of fuel.

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