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Thursday, March 15, 2018

Putin, Nabiullina is not a decree

Vladimir Putin gave an interview to Bloomberg. In it he talked about the geopolitical situation in the world, has affected the relationship between our country and the United States, assessed the prospects of relations with China. The President also paid attention to the domestic economy. According to him, Russia now has enough money to cover budget spending and borrowing on the side she doesn’t need.

photo: Mikhail Kovalev

In addition, as Putin said, he is in contact with the members of the Board of the Central Bank and its Chairman Elvira Nabiullina. However, as says the head of state, he does not give the Bank of Russia directives. “MK” has highlighted the main statements of the head of state and asked them to comment on the independent experts.

Vladimir PUTIN:

– Russia has sufficient financial strength to cover the budget expenses in order to resort to external borrowing.

Igor NIKOLAEV, the Professor of the Higher school of economy:

“If we have enough funds, then why we do not index the pensions in full? Why not run a social obligation? Why falling investment in fixed capital? As you know, in the first half of 2016, investment in fixed capital fell by 4.3% year on year to 5.3 trillion roubles. And at a faster pace than GDP, which fell by 0.9% in the year terms. So what is it? We have observed an obvious shortfall in the fulfillment of social obligations, for investment, but we argue that the money is there. This is not so, our financial strength is rapidly decreasing, the Reserve Fund drop to zero next year”.

Vladimir PUTIN:

– We are very pragmatic and very cautious. We reduce costs for those positions that do not consider a priority, and do not intend to thoughtlessly scatter our reserves thoughtlessly and burn them at the sake of some political ambitions. We will act very carefully”


“Federal spending in the 2017-2019 biennium. frozen at the level of 15.8 trillion rubles a year. This, incidentally, is less than would be in 2016 — almost to 16.3 trillion rubles a year. That is next year’s money in the budget will be significantly less than in the current year, when many social obligations remain unfulfilled. Thus, the decline affected to a lesser extent defense spending, that is not true of other articles — their “cut” significantly. In particular, we are talking about medicine, education. Wrong when in the state, which under the Constitution is a social save on the health of its citizens.”

Nikita ISAEV, Director of the Institute of contemporary Economics:

“The statement of Vladimir Putin that next year the budget deficit is expected at around 3% is clearly based on the forecasts of the Ministry of Finance (the Ministry insists on these numbers). And that’s fairly optimistic expectations. Also this year, the planned deficit of 3% or of 2.36 trillion. However, only the first half of the deficit already amounted to 1.52 trillion rubles. At this rate, by the end of the year you are lucky if 4% will be a problem. So do not be surprised if these forecasts will be adjusted. A deficit of 3% next year is possible if oil at $ 55 will hold. Also this year the average price of a planned $ 50. However, we all see what happened in the end. The main reason why it is necessary to listen, what is called, “between the lines” is the fact that the government has another tool to maintain the desired level of deficit, the devaluation of the ruble”

Vladimir PUTIN:

– Last year, the Federal budget deficit was 2.6 percent. Agree, this is quite an acceptable value. This year we expect it to be a little bigger, somewhere in the region of three percent, maybe three.


“It would seem in nominal terms 3% — not so much. But how to maintain this 3%? For example, one to balance the budget may not be enough small amount (the same 3% but he can’t find the sources. Another way to balance the need more (say 10%), however, he is able to find the money. Moreover, cheap money. Therefore, a deficit of 3% is not significant”.

Vladimir PUTIN:

The Central Bank looks at what is happening in the economy, and, of course, I keep in touch with members of the Board and Chairman of the Central Bank, but I never give directives.

Yan ART, Vice-President of the Association “Russia”:

TSB is a public institution but not part of the Executive branch. That is, the Bank is not subject to the government and the President as the chief Executive. So from a legal point of view, Putin is right. On the other hand it is clear that we have an authoritarian system of governance and the head of state can ask about something, the Central Bank to send securities for any purpose. But if when you assess the policy, I do not feel that the regulator is under the control of the Kremlin. You can argue with the essence of the strategy Nabiullina, but I think she’s a person consistent and principled. It is seen that it has a strategy and develops it. With regard to verbal intervention, we have virtually none. Furthermore, with our traditional distrust of the statements of the officials verbal interventions have the opposite effect.”

Nikita ISAEV, Director of the Institute of contemporary Economics:

“Let the President gives direct orders to lower the rate, but the line is so thin between the decree and just expression of the thoughts out loud… To the same and without Central Bank actions the Russian currency market is extremely sensitive to so-called verbal interventions, that is, the statements not only of the President, but the statements of officials, even if unsubstantiated. Small trading volumes (by world standards) allow without any problems and cost to manipulate the market.”


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