Dmitry Butrin
One day before the United Russia party congress, the top government officials in charge of the national economy discussed the future of the economic crisis and specific troubleshooting measures.
New initiatives include federal guarantees for legal entities' bank deposits, revision of the federal budget in January-February 2009 in favour of the regions and increased investment allocations in excess of the projected 1.17 trillion roubles ($41.8 billion).
Prime Minister Vladimir Putin, who discussed anti-crisis measures with President Dmitry Medvedev and the Government on Wednesday, is expected to break the main news at the upcoming party congress.
On Wednesday, Deputy Prime Minister and Finance Minister Alexei Kudrin, Economic Development Minister Elvira Nabiullina, Central Bank Chairman Sergei Ignatyev and Deputy Industry and Trade Minister Andrei Dementyev explained current economic policies at the State Duma's Government Hour.
Presidential Aide Arkady Dvorkovich did the same at the United Russia media forum.
Later in the day, all of them were joined by Vladimir Putin, Presidential Chief of Staff Sergei Naryshkin, First Deputy Prime Minister Igor Shuvalov, and Deputy Prime Minister and Chief of Government Staff Sergei Sobyanin. They discussed the upcoming United Russia congress with President Medvedev.
Ignatyev and Kudrin addressed the State Duma on international reserves control, while Nabiullina and Dementyev discussed the government's anti-crisis policies.
Dvorkovich focused on prospects for 2009 and tax-and-economic policy priorities.
Although the speakers did not describe the current stage of the crisis, statements by Ignatyev, Kudrin and Dementyev provided an insight into the government's stand. Talking about the industrial situation, Dementyev said it was becoming more difficult to take out loans.
He said state monopolies and the energy industry were revising demand, that the latter would generate three gigawatt less electricity, and that railways needed 7,000 fewer freight cars.
Dementyev said the metallurgical sector was posting a production slump, caused by plunging demand in the export market, construction industry and engineering sector, and that its output now accounted for 20-80% of peak July-August 2008 volumes (depending on product range).
Ignatyev and Kudrin admitted that the financial sector had certain problems disbursing funds allocated to the banking system for corporate credits, but that the liquidity situation would be stabilised completely in November-December 2008.
Kudrin said the state-owned Vneshtorgbank had channeled 120 billion roubles ($4.3 billion) into the industry this October, and that it planned to invest another 190 billion roubles ($6.8 billion) in November. He also said the National Welfare Fund had invested 90 billion roubles ($3.2 billion) into the stock market through Vnesheconombank.
Ignatyev said the Central Bank's decision to raise the refinancing interest rate to 12% aimed to facilitate high-profit bank loans and to prevent the outflow of capital. Kudrin said there were plans to reduce the refinancing interest rate in July-December 2009 after bank rates and prices stabilised.
As before, large-scale state spending remains the main bailout method. Nabiullina told the State Duma that the 2009 federal target programmes and the Federal Selective Investment Programme could receive even more than the projected 1.17 trillion roubles because this implied efforts to maintain state demand.
Kudrin said the 2009-2011 budget would be revised in January-February 2009, and that the Finance Ministry would allocate up to 500 billion roubles ($17.9 billion) from the Reserve Fund for supporting regional budgets.
Nabiullina said Russia needed a new economic growth model because the previous model was based on oil prices and foreign loans, and that new sources of "long money" had to be found. But she did not go into details.
Twenty minutes later, Kudrin did not deny the possibility of additional federal spending, but also stressed that the government was implementing the 2009-2011 budget in line with the same principles as the Chinese government.
This November, Beijing said the government of China planned to spend an additional $586 billion on infrastructure and construction, rather than the banking sector, by late 2010.
However, the share of infrastructure expenses in the Russian GDP exceeds similar Chinese parameters. "We have done this even more resolutely than China," Kudrin said, commenting on projected state-spending increases next year.
Addressing the United Russia forum, Dvorkovich broke even more important news. He said the government was discussing the possibility of guaranteeing legal entities' bank deposits. (The Deposit Insurance Agency now covers only private deposits - Ed.)
Next year, the Central Bank or the Finance Ministry will have to spend hundreds of billions of roubles on guaranteeing corporate deposits and settlement accounts. In fact, not a single major nation has so far resorted to such measures.
However, the government is not discussing 100% private-deposit guarantees.
Dvorkovich said the government was also debating changes in the value-added tax advance payments concept starting with January 1, 2009, and amortization profit increases (profit tax calculation rules) from 10% to 30%, also starting with January 2009, rather than 2010, as planned.
It is unclear how the government will compensate businessmen for the upcoming unified social tax raises in 2010.
Although these measures do not contradict each other too much, they do not resemble a standard plan. Kudrin said the government would soon augment the October 30 economic bailout plan, and that it would stipulate new mid-term and long-term support.
The plan was probably discussed at a meeting with President Medvedev. Prime Minister Putin is expected to discuss the meeting's results at the United Russia congress.