CB said about the necessity of changing fiscal policy


“The economy has adapted to external challenges faster than we expected,” said Chairman of the Bank of Russia Elvira Nabiullina, speaking at the St. Petersburg international economic forum (SPIEF) . According to her, this applies to the balance of payments, export/import, financial system that has kept the capital and shows a profit.

According to Nabiullina, now the goal is to adapt the fiscal policy to new challenges, to new oil prices. Should the change in fiscal policy, you need to stop to Fund the budget for the reserve account, to avoid excess liquidity, she said.

The head of the Central Bank also said that the more the budget deficit, the tougher is monetary policy of the Central Bank. “And we even estimate, the larger the deficit by 1%, the other equal to 1 percentage point above the rate. That is the price of the budget deficit is a higher rate in the economy. We will pursue monetary policy to achieve inflation of 4% and investment growth,” Nabiullina said, adding that in Russia inflation is at the end of the list of all countries of the world. “In Asian countries, the inflation rate is two times lower. We’re losing the competition for investors who are afraid to invest in the economy with high inflation, investments eaten up by inflation,” she said.

Attempts to stimulate economic growth by increasing public debt can lead to debt trap, says Nabiullina. “I think if you try to stimulate economic growth through the growth of the national debt, you can get into the same situation as with the inflationary spiral in the debt trap,” she said (quoted by Interfax). Nabiullina said that the acceleration of the economy through the growth of the national debt is government spending and public investment.

“I think we have a problem in another area — we need private investment, growth through private investment. And the national debt is future taxes, it must be paid, so I think, it is certainly not an alternative to no,” said she.