Story at AP/Yahoo.
Finance Minister Anton Siluanov announced Tuesday that the government has adopted an anti-crisis plan that will freeze the level of spending.
The plan also sees the budget returning to a surplus as soon as in 2017 and the government preparing structural reforms "so that we do not burn recklessly through Russia's sovereign reserves."Bad news from the Russian fiscal front.
Pretty soon our debt doomsday policymakers will probably be pointing admirably toward Russia.
If Putin gets tossed, he could probably sign-up with any one of a number of Peterson funded un-think tanks as a foreign correspondent.
8 comments:
Mike the 17% rate (if they leave it there...) may be able to even overcome this fiscal idiocy....
iow the interest income generated by the 17% rate may be enough in itself to start to turn it around even if the "G" is held constant like this statement portends....
the 17% rate is pretty drastically high... but they have to hold it there...
rsp,
Matt, 17% only works if they fund domestic investment to diversity their economy away from extraction at a lower rate. They seem to understand this. Otherwise, a fiscal surplus along with a high policy rate will bury the Russian economy faster than sanctions. They need to get rubles into the economy where they are needed pronto.
Well Tom I'd hope the interest paid will take place before they can get to the point where (to them) they get near a surplus...
iow this guy may want to get to surplus but if they hold the "G" AT LEAST constant and the xfers increase thru interest paid, then the deficit will increase regardless of what this guy thinks... I assume this guy is an idiot and doenst know what he is talking about (as usual with these people..)
So they MAY ge their fiscal expansion afterall thru interest paid on govt debt... iirc the 17% would be like $100s of $B here as a % of Russia GDP... pretty substantial xfer payments...
iow it would be like here in the US, the govt would increase fiscal by $200B in a year from current $4.2T to $4.4T.. that would be very meaningful here imo...
So it might still get better for them domestically there despite their best efforts....
rsp,
I mis-spoke here:
"then the deficit will increase regardless of what this guy thinks"
I should have said that:
"the leading flow of govt spending will increase regardless of what this guy thinks..."
deficit will go wherever who cares....
Russia has run a surplus because it is chiefly an export economy and net exports offsets the surplus. If they want to shift away from an extraction economy and develop a production economy, which they realize they must do, then they have to export something else, like weapons, which they are good at manufacturing. They have an advantage over other weapons manufacturers like the US, UK, and France, owing to the depress ruble making Russian weapons so much less expensive then others. This is the emphasis now and they have signed some big weapons deals with China and India.
Of course, Russia will continue to have a strong extraction sector for the foreseeable future since they are so resource rich. But they have to diversify, too, and are taking steps to do it. They need to realize that they don't need foreign investment but can fund themselves since they are now sovereign in the ruble after dropping the peg.
Tom,
I'm trying to say that they may (inadvertently) create/foment a domestic recovery there (a la Iceland) due to these high rates increasing xfer payments....
they (to them) have the rates up "to defend the ruble" or some shit....
iow they may get the domestic "diversification" via this increase in xfers via interest paid....
a broken clock can be correct , etc...
rsp,
They need a lot more than high rates to effect the needed transfers. And they do have to keep an eye on the ruble to prevent the currency collapse and state collapse that the US is trying to engineer.
The USD-RUB is heading back toward 70. Not catastrophic yet, but the US is threatening to put more pressure on.
Well then hopefully (to them) they will put the rates up to 20% to "defend the rouble" even more.... rsp,
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