I wrote yesterday about economist Konstantin Sonin’s concrete steps for the Kremlin to take to turn the economy around. In RIA Novosti yesterday former Finance Minister Alexei Kudrin had his own advice for the Kremlin. It is not in a numbered format, but more in the form of an interview, so I’ve pulled what I consider to be the more important points.
In contrast to Sonin, Kudrin says that he doesn’t believe short-term measures will help turn around the economic crisis currently facing Russia.
“We should proceed from the understanding of the nature of current events and their long-term [results]. In this context there is an understanding that the main problems of the Russian economy are structural, which includes a high dependence on oil,” Kudrin believes.
“In order to boost growth in the future, we need action that is more systematic, & strategic, which cannot be done in one or two years. Therefore, strictly speaking, we need structural reforms.”
According to Kudrin the need for structural reform is long overdue, but the authorities held off for several reasons, including because they were reluctant to carry out unpopular steps.
Kudrin has long advocated raising the retirement age, and reiterates his advice here. He dismisses fears about the political implications of such a decision, saying that the only people who don’t like the plan are those set to retire in the next 5-10 years.
Other points Kudrin brings up:
- An anti-crisis plan is needed but should be aimed at promoting the modernisation of enterprises.
- Kudrin “advises Russians to keep their savings by purchasing federal bonds (OFZs)*, which the Finance Ministry intends to issue. “It will be a reliable tool with favorable interest rates”.
- Kudrin believes that the sanctions will be lifted by late this year, or early next year.
- He also suggests that the Government to wait until the middle of next year to try to sell stakes in state-owned companies like Rosneft, Sberbank, and VTB.
*”Last September the Ministry of Finance said that it was considering issuing a special debt instrument for the population. The new government bonds for citizens should be similar to bank deposits, with the possibility of early repayment, the terms of OFZ for individuals amount to three to five years, the head of the ministry’s debt department said last week.”