MOSCOW: Russian central bank Governor Elvira Nabiullina on Thursday urged balancing the state budget over the mid-term despite robust federal finances.
“The Reserve Fund enables us to finance the increased budget deficit, although in our view a program is needed to balance the budget system over the mid-term,” Nabiullina said at the annual conference of the Association of Russian Banks in Moscow.
The bank chief expressed worries that the budget system has not fully adjusted to the plunge of oil and gas revenues.
Nabiullina also warned that the inflation rate could rise, although the rate in March has decreased to 7.3 percent compared with almost 17 percent last March.
She said that although the economic recession is not over, “the situation is already close to the point of stabilization,” especially the situation in the current financial market.
“Besides global factors, a floating exchange rate policy and adjusting balance of payments under low oil prices also contributed to it,” she said.
Earlier in the day, Russian Finance Minister Anton Siluanov said the country’s economy experienced its most difficult times in the last decade.
“Decline of revenues in the balance of payments was around 13 percent of the GDP (gross domestic product). There is also decline of income on the current account and capital account,” Siluanov said.
The minister nevertheless expressed confidence that the Russian government and the central bank are able to control inflation and lower interest rates.
The Russian economy has plunged into a recession since 2014 amid the drop of global oil prices and Western sanctions imposed over Moscow’s alleged intervention in the Ukraine crisis.
Russia’s federal finances are relatively robust with low sovereign debt and the budget deficit has been controlled within 3 percent of its GDP, proportionately less than in a number of European Union states.
