The International Monetary Fund has recommended that the Bank of Russia give up a containment policy of the consolidation of the ruble's real exchange rate to concentrate on fighting the inflation.
"We are recommending that the Bank of Russia assume a policy of decreasing the inflation and abandon its target of containing the consolidation of the real rouble's exchange rate," said Poul Thomsen, head of the IMF mission in Russia, at a press-conference this Tuesday.
The central bank cannot simultaneously pursue target estimates on inflation and on currency policy, he said.
No central bank, including the one in this country, cannot contain the consolidation of the national currency's real exchange rate for a long time-no central bank should ever do this, he added.
In his opinion, the only line that the central bank is capable of taking for the containment of the consolidation of the ruble's real exchange rate is increasing its nominal rate or hiking the inflation. He also added that if this containment is the Russian government's objective than the only vehicle is a fiscal policy.
The budgetary policy should be toughened for this, he said. It should aim at the further increase in taxation in the oil industry and the saving of this money in the stabilization fund in order to lift pressure from the ruble and to contain the consolidation of the ruble's real exchange rate, said Mr. Thomsen.
The IMF mission, which worked in Russia from June 15 to 25, he continued, came to the conclusion about a certain incompatibility of measures being taken by the Russian government in this respect. It is a policy of decreasing inflation and contained consolidation of the rouble's exchange rate with the simultaneous softening of the budgetary policy, he explained.
The Russian economic policy calls for a certain correction, according to the IMF expert. Measures being carried out in the macroeconomic sphere are quite reasonable but with the transpired signs of tensions in macroeconomics, a certain adjustment would be desirable, said Poul Thomsen.
At the same time, the IMF does not forecast any acute macroeconomic problems, he said. And even if the Russian government conducts targeted economic measures, we do not predict any instability in the macroeconomic sphere, he specified.
Besides, the IMF looks at the basic estimates vested in the federal budget for 2005 as impracticable.
Poul Thomsen remarked about the Russian government's intention to decrease the maximum unified tax rate and to convert part of privileges into a monetary form from the next year.
This will cost the budget about two% of the GDP, but these are indispensable reforms. We assume their pursuit is not to endanger the stability of the macroeconomic situation, he said.
The government plans to win a favourable balance, noted Mr. Thomsen. But we think those basic preferences that underlie the federal budget estimates for 2005 are non-realistic. He pointed in part to the planned drop of expenditure on the sub-federal level. The federal government lacks instruments for regulating and monitoring the expenditure on the sub-federal level, he added.
This considered, Poul Thomsen believes that the Russian government should find resources for additional budgetary gains worth 1.4% of GDP next year. This all depends on either additional measures to increase taxes or curbed budgetary spending next year, concluded Mr. Thomsen.
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