Kudrin says Russian defense firms unlikely to fulfill state order.

Russian defense industry companies are unlikely to fulfill the government defense order due to a high number of inefficient enterprises in the sector, former Finance Minister Alexei Kudrin said Thursday, as cited by RIA Novosti.

“I can say that the industry in its current condition cannot fulfill this program,” Kudrin said, adding that the defense sector had not been reformed.

He said the volume of Russia’s defense order adjusted to purchasing power parity was expected to amount to U.S. $77 billion in 2012.

Kudrin resigned in September 2011 following policy disagreements with President Dmitry Medvedev with the biggest sticking point being the government’s intent to increase military spending by 20 trillion rubles by 2020.

Kudrin said that he had proposed extending the arms re-equipment program for five years.

But Presidential Aide Arkady Dvorkovich said Thursday the government should not refuse to increase its defense spending, as insufficient funding could become more painful for the country’s budget in the future.

“Yes, there are risks that (our) defense spending could be excessively high, but I think, that we should have a powerful, skilled, and well-equipped army,” Dvorkovich said.

Separately, Kudrin said that the government should immediately start resolving the problem of increasing the retirement age. He said that the issue, which is to cost around 1%–2% of gross domestic product in five or 10 years, could be resolved gradually over the next 10 or 15 years.

Kudrin said that demographic and pension problems would be the core issues for Russia’s economy in the upcoming years. He said that the deficit of the pension system amounted to 875 billion rubles in 2011, and expected to reach 1.075 trillion rubles in 2012, and 1.300 trillion rubles in 2014.

Kudrin said that Russia’s economy has been losing 300,000–400,000 people of its workforce annually since 2008.