29 May 2004 22:31
Russia set to slash inflation by 2008 - finance minister
Speaking live in the "People and Power" phone-in slot on Mayak radio on 29 May, Russian Finance Minister
Aleksey Kudrin said that the government intended to bring down annual inflation in Russia to 3 per cent by 2008.
"First, as for prices for natural monopolies, at the last government meeting last Thursday [27 May] we decided
that from 2006 these will not rise above inflation - only gas prices will go just above that - but nevertheless,
ceilings have been set which will make it possible for inflation to be 3 per cent by 2008," Kudrin said. He said
the government had stabilization mechanisms which would enable it to control the money mass in circulation and thus
achieve the 3-per-cent goal.
Kudrin added that the stabilization funds were already starting to have a beneficial effect on the country's
banking and finance system. Legislation passed in 2003 is also kicking in: the new law demanding that all banking
investments are insured up to the equivalent of 3,000 dollars is giving ordinary investors confidence to put their money
into banks, enabling banks such as Sberbank to develop.
GDP
The finance minister said he thought that President Putin's goal of doubling GDP by 2010 was feasible, thanks to
the boost to the economy given by high oil prices. "In his address to the nation last year, President Putin said
that GDP was to be doubled within 10 years; he has amended this and now he is saying: let's try and double GDP by
2010. In order to double GDP in 10 years, we need economic growth of an average of 7.2 per cent. That means that in the
first year it could be less, but the next year and then onwards it needs to be substantially higher.
"Today, the reforms we have decided on show that if we carry these out, we can count even on an increase in the
rate of growth. The oil component, from the high oil prices, accounts for between 2 and 3 per cent of that growth,"
Kudrin said. "Whilst we have good years with high oil prices, we will have to take advantage of this and achieve
results even earlier. Why not, if the world market gives us such an opportunity."
Oil
However, asked about Russia's role at the recent G8 summit and its view on oil prices, Kudrin pointed out that
"Russia in recent years said that if oil prices fall, we will not restrict oil extraction. We will follow world
tendencies and in the case at issue, if the price is high we shall make use of this, we will increase production in
order to benefit from this; but if it falls, we will not create artificial obstacles to a drop in prices such as would
lead to a reduction of the rate of world economic growth." He said that Russia had urged the G8 to state in its
final communique that all countries should increase oil production in order to stabilize prices on the world market.
Privatization
Asked where Russia got so many billionaires, Kudrin said they emerged in the early 1990s during the early
privatization period. "Big capital and world markets were as yet afraid to come in to Russia, they did not believe
that Russia would start to carry out market reforms quickly and become a civilized country. The market countries of the
West, after all, took centuries to get where they are. And nobody believed that Russia would become stable, with proper
market institutions," Kudrin commented.
"And so the enterprises put up for privatization at tenders and auctions were indeed purchased for small sums.
Now, as a result of our country developing, these enterprises have started stable production of output which is being
sold on domestic and foreign markets. Of course, some of these enterprises are involved in production of natural
resources, oil. World oil prices today, of course, are the highest they have been for the last 20 years. This means -
something nobody expected - that these oil companies have sharply increased in value, because of the high revenues
following on the high prices on international markets. Therefore, of course, these companies grew, and what previously
was worth 100m dollars can today be worth 1bn dollars.
Market value, other points
"I can say that in the last year, all Russian companies increased in value by an average of 70 per cent, in just
one year! This is the highest index in the world. Nobody ever believed this would be the case," Kudrin said.
The finance minister went on to add that where wealth had been gained by dishonest means, legal action must be taken
and justice must follow its course. "With this part of my response to your question, of course, I am not talking
about those cases where this capital was simply obtained by theft. Punishment must be meted out for this, and this will
happen regardless of the fact that all this happened three or five years ago."
Responding to questions phoned in and posted on the Internet and fielded by host Yuliy Semenov, Kudrin explained the
budget reform outlined by President Putin in the latter's State of the Nation address on 26 May. He emphasized that
the restructuring of the budget sector and the financing of budget-funded organizations depending on the results they
achieve were aimed at bringing reforms in Russia's health care, education and housing, to improve the quality of
services and quality of life for Russia's citizens. He confirmed that from 2005 the federal budget is to increase
its allocations to the pension fund, and reassured listeners that legislation which would enable military officers to
afford housing was in place.
[Radio Mayak] |
RUSSIA IN FACTS
