Former Russian Finance Minister: The Kremlin doesn’t understand the new economic reality
The former Russian Minister of Finance and Chairman of the Board of the Centre for Strategic Research, Alexei Kudrin, believes that the Russian government doesn’t have a clear understanding of the existing economic realities after the fall in oil prices and the reduction in budget revenues.
“The price of oil has fallen; we have shortage of revenues and problems with our growth factors. We learned to spend money so easily, when Russia experienced economic growth, and now I want to say that the Russian Government and Ministries have no understanding of the fact that we have moved to another reality,” Kudrin said as reported by TASS news agency.
According to him, the average economic growth in recent years was less than 1%, and will be less than 1% until 2020. Kudrin stated this was a major challenge for the country.
“The budget deficit is 2.5 trillion rubles. What is 2.5 trillion rubles? It represents the entire defense program of the country or the funding of almost the entire education sector of the country. It is such a high amount and we are trying to cover it with reserve funds but we have already started to build up domestic debt,” the former Minister of Finance noted.
Kudrin also emphasized that the burden of accumulated debt would lead to an increase of expenditures on servicing the debt. According to him, the expenditures needed to service the debt could increase by 1% of GDP within four years.
“It will simply be 700 billion of additional expenditures on servicing as opposed to allocating this amount to investments and other tasks. As of now, we haven’t transformed our policies and realities; and the challenge of low growth remains,” Alexei Kudrin noted.