Russia is running out of options to bolster finances
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MOSCOW • Russia will scale down state support of the economy next year due to the rising cost of servicing burgeoning debt amid the Covid-19 pandemic and a collapse in oil prices, says Finance Minister Anton Siluanov.
Running out of options to bolster public finances, Russia has more than doubled its domestic borrowing this year, raised some taxes and increased state spending as it relaxed its budget rule that shields the economy from external shocks.
Russia's extra state spending to support the economy this year reached 4.5 per cent of gross domestic product (GDP) and will shrink to 1 per cent of GDP next year, Mr Siluanov told reporters in comments cleared for publication yesterday.
Nevertheless, state development bank VEB may buy into preferred shares of state-run Russian Railways to provide the latter with funds for its investment programme, he said.
He shrugged off the World Bank's suggestions that Moscow can opt for a more gradual fiscal consolidation than currently planned. "If we continued the same policy as this year, we would pull out money from the economy... We can't withdraw all the liquidity from the market and finance spending," he said.
The Finance Ministry raised nearly 5.3 trillion roubles (S$95.61 billion) by selling OFZ Treasury bonds in the domestic market this year, with the bulk of the bonds purchased by major banks, which dented rouble liquidity levels in the interbank system.
Russia has to return to the budget rule in 2022, Mr Siluanov said, referring to the budget system praised by the International Monetary Fund and the World Bank. "If so, then we can't keep our spending high all the time.
"We carry out responsible policy unlike other countries that flood and will flood their economies with money."
Russia's debt-to-GDP ratio has already reached 20 per cent, the level which the ministry did not want to exceed, and spending on servicing debt will rise to 1.4 trillion roubles in 2023 from up to 800 billion roubles this year.
Russia has no plans to raise taxes after hikes this year, Mr Siluanov said.
Running out of options to bolster public finances, Russia has more than doubled its domestic borrowing this year, raised some taxes and increased state spending as it relaxed its budget rule that shields the economy from external shocks.
REUTERS
