Russia's Ministry of Finance has proposed cutting the federal staff by 20% to reduce the federal budget.

Finance Minister Aleksey Kudrin said that, by doing so, the department could save 37 billion rubles (about $1.2 billion) per year.

The initiative is in line with President Medvedev's call to renovate the government by rejuvenating an aging work force. Medvedev also proposed reducing the upper age limit of civil servants to 60.

Should the new bill be passed, five percent of government employees - not just in the capital, but also in the regions - would be out of work by April 1, 2011. Another five percent would have to leave in April 2012, and April 2013 would see the final 10% of federal employees laid off.

The Ministry of Finance suggested that 50% of the saved budget funding could go back into the ministry as bonuses for those who quit. The remainder could be used as an incentive to attract higher skilled employees by making salaries more competitive.

Currently, the government employs around 1.6 million people, so if the proposal goes through, some 300,000 people would lose their jobs.

The ministries may also be forced to follow the new upper limits for the number of employees.

According to Konstantin Smirnov, the editor of the Moskovskiy Komsomolets newspaper, the initiative is likely to stimulate staff renewals and help tackle corruption.

"By 2012, the budget system in Russia will be radically transformed to become a target-based one," told Smirnov.

"This means that every month officials will have to prove that certain set goals have been achieved. The current staff isnt ready for that. That's why only those prepared for competition will remain. We don't have many of them, and they are mostly young employees who came in after the year 2000."