Mobile  |  About us  |  Photos  |  Videos  |  Subscriptions  |  RSS Feeds  |  Today's Paper  |  Classifieds  |  Contact Us
The Daily Star
SATURDAY, 19 APR 2014
03:04 PM Beirut time
Weather    
Beirut
27 °C
Blom Index
BLOM
1,214.01down
International
Follow this story Print RSS Feed ePaper share this
IMF urges Russia to tighten fiscal and monetary policy
Reuters
FILE - The logo of the International Monetary Fund (IMF) at the organization's headquarters in Washington, DC, in this May 16, 2011 file photo. (AFP PHOTO / Saul LOEB /FILES)
FILE - The logo of the International Monetary Fund (IMF) at the organization's headquarters in Washington, DC, in this May 16, 2011 file photo. (AFP PHOTO / Saul LOEB /FILES)
A+ A-

MOSCOW: Russia needs to adopt both a tougher budget and tighter monetary policy to guard against the risk of overheating and to bear down on inflation, the International Monetary Fund said in a statement Thursday.

The statement comes after a meeting between the IMF’s Executive Board to discuss the results of annual consultations with the Fund and the Russian government.

IMF directors “recommended an ambitious fiscal consolidation path to reduce overheating pressures and vulnerabilities and ensure intergenerational equity,” it said.

They also “generally recommended a gradual further tightening of monetary policy to contain underlying pressures and anchor expectations.”

The IMF has warned repeatedly in recent months that it fears Russia’s economy is in danger of overheating – implying that demand is growing faster than potential output, leading to higher inflation.

In its latest statement, the IMF predicted that Russia’s economy would grow by around 4 percent in both 2012 and 2013, slightly above its assessment of the underlying growth potential.

The IMF said that although inflation has come down in recent months, the fund’s measure of core inflation remains high at around 6 percent.

It forecast that inflation would rebound to 6.5 percent by the end of the year, compared with 4.3 percent in June.

The forecast implies that Russia’s central bank will miss its 5-6 percent inflation target for 2012, increasing pressure on the central bank to raise interest rates.

The IMF’s call for fiscal consolidation also reflects its long-standing concerns about Russia’s high non-oil deficit – a measure of the underlying budget stance that excludes oil taxes.

The statement noted that although the non-oil deficit declined to 9.8 percent of GDP in 2011, from 12.7 percent in 2010, the deficit is set to rise by around 1 percent of gross domestic product this year.

The IMF commended Russia for adopting a new fiscal rule that will base government expenditures on the long-term average oil price. But it also said that it “saw scope for further improvements to allow for the effective rebuilding of the Reserve Fund.”

The Reserve Fund, which is designed to protect the federal budget against a fall in oil prices, is at present worth some $60 billion (3.2 percent of GDP), down from $143 billion in 2008.

The IMF said that effective fiscal consolidation would also need to be underpinned by structural reforms, including pension reform.

Structural reforms are also needed to improve the country’s investment climate and long-term economic growth, the IMF said, recommending that Russia improve the rule of law, reduce corruption, and privatize state-owned companies.

“The challenge in the short term is to manage domestic demand in order to avoid overheating and in the medium term to fully realize Russia’s significant growth potential,” the IMF said.

 
A version of this article appeared in the print edition of The Daily Star on August 03, 2012, on page 6.
Home International
 
     
 
Russia
Advertisement
Comments  

Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

comments powered by Disqus
Advertisement


Baabda 2014
Advertisement
Follow us on Facebook Follow us on Twitter Follow us on Linked In Follow us on Google+ Subscribe to our Live Feed
Multimedia
Images  
Pictures of the day
A selection of images from around the world- Saturday April 19, 2014
View all view all
Advertisement
Rami G. Khouri
Rami G. Khouri
Why Israeli-Palestinian talks fail
Michael Young
Michael Young
Why confuse gibberish with knowledge?
David Ignatius
David Ignatius
Echoes of 1914 characterize the Ukraine crisis
View all view all
Advertisement
cartoon
 
Click to View Articles
 
 
News
Business
Opinion
Sports
Culture
Technology
Entertainment
Privacy Policy | Anti-Spamming Policy | Disclaimer | Copyright Notice
© 2014 The Daily Star - All Rights Reserved - Designed and Developed By IDS