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28 Jan, 2010 15:15

Davos: Russia’s anti crisis plan not delivering bang for its buck?

Though the Russian government is beginning to see some of its anti crisis funds be repaid, questions are being asked about how well the bailout money was spent.

The Russian government spent over $200 billion, or 14% of GDP, supporting the Russian economy during the crisis, with much of that going to businesses and banks.

However, according to Deputy Finance Minister Aleksey Savatyugin, some of the money is already beginning to come back.

“The government aid provided to banks and industrial companies has already started to return. The help was mainly in the form of credit lines. So it means not only the recovery of capital but also interest. It was credits from the Central Bank and through Vnesheconombank. We are seeing a good return ratio.”

But just how much of the money that was lent out was put to an effective use is debatable, and Garegin Tosunyan, head of the Association of Russian Banks, says the analysis is not comforting.

“There are experts who estimate that 1 point of government anti-crisis aid provided 1 point of efficiency in countries like the US. In developing countries it was around 0.5 and in Russia it was even lower, at 0.01,” Tosunyan claims.

It is hard to believe that Moscow's aid was one-hundredth as effective as that handed out by Washington, but even with a more sympathetic assessment of Russian efficiency, many questions need to be answered. The most important of them is what the government can do to get more bang for its buck in the event anti-crisis measures are needed again, which could be all too soon if there is a double dip recession.