Russia » Economics
Author`s name Michael Simpson

World Bank: Russians to Grow Richer

Russia's foreign debt is to diminish
Experts with the World Bank have published a report on the official website of the Bank's office in Moscow. According to the report, the well-being of 10 million Russians (22% of the population) may improve by the year 2005; they will cross the poverty line. Thus, the number of poor people will drop by about 25% in Russia as a whole.

According to the World Bank estimates, 29% of the Russian Federation’s population (over 42 million people) are currently living below the poverty line. According to the data obtained in the last population census held in October 2002, the population of Russia comes to 145.1 million people.

At the same time, the official data of the Russian Federation Statistics Committee show that the number of Russians with incomes lower than the subsistence minimum came to 37.1 million people (about 26% of the total population of the country) in the first three months of 2003.

Experts with the World Bank say that living conditions will improve if "the economic growth remains the same or even improves; on condition that social and economic reforms are carried out in the country with a view to correctly distribute extra revenue between the economic sectors."

The World Bank report emphasizes that the unemployment level in Russia has dropped by 7% since 1999; says that the 4% economic growth rate achieved today will persist in 2003-2005.
As for macroeconomic showings, World Bank experts say it is not ruled out that investment may go up by 2.5-3% within the abovementioned period. However, they add "this growth will be enough only to bring the level of aggregate investment up to 20.5% of GDP by 2005. It is less than in other countries with transitional economies."

World Bank experts say that the power sector of Russia's economy still gets less investment than it requires. For example, the World Bank estimated that Russia's power monopoly, RAO UES of Russia, will need investment to the tune of $50 billion within the next ten years in order to keep its present-day maintenance level. For the time being, WB experts say, RAO's current investments come to just a small part of this sum.

That is why the World Bank welcomes the passage of a federal law on power engineering of February 4, 2003; the Bank's report says this is an important milestone.
However, experts are anxious that "the reform process can be frustrated if it is managed and carried out incorrectly."

According to the World Bank estimates, Russia's long-term foreign borrowings will drop to $108 billion. The report says that reduction of foreign debt will also change the ratio between long-term borrowings and GDP; the ratio will come to 33% in 2003, and the showing will drop to 25% in 2005.

World Bank experts pointed out considerable success in the realization of taxation and budgetary policy. Experts say that "much excess revenue together with high oil prices on the world market resulted in reduction of the governmental debt coefficient from 90% of GDP in the end of 1999 to 45% in the end of 2002." The World Bank thinks that reduction of the RF foreign debt is connected with the effective work of supervisory boards in this sphere.