Russia is overcoming the recession – Finance Minister Kudrin
RT: Only this week a government source said that the economy will reach pre-crisis levels as early as 2012. Do you subscribe to that view?
Aleksey Kudrin: Our new forecast for the economy allows us to say that by the end of 2012 – i.e. it’s expected to be the outcome of 2012 – Russia’s GNP will get back to pre-crisis levels.
RT: You said on Thursday that you’re against spending more on bailouts for Russians. Are you happy with the agreement that’s been reached here between the G20 Finance Ministers?
AK: What we were talking about was that if Russia’s income were to start growing significantly this year thanks to oil revenue, the question is whether we should use this income to increase this year’s expenditure as well. And I was saying that this year we cannot afford to increase the budget’s expenditure as this may trigger new inflation risks. As for next year, we have prepared an offer where it is advisable not to use the surplus oil income, as large as it can be in the most positive forecast, to cover direct expenditure items, but we should rather use it to cut down on using our reserve funds; which should help us avoid inflation risks next year.
RT: You’ve said just now that BRIC countries are going to give 80 billion dollars to the IMF. What do you expect to achieve with this money?
AK: These funds will not be allocated to the IMF right now at the time we sign the agreement. The IMF has a right to claim these funds from us within two years as the need arises with the countries qualifying for support. So the IMF is going to follow its own procedure of working out support programs for the countries requesting help and use these funds accordingly. This money will be used to support countries impacted by the crisis.
RT: Could you just say again what the relationship between that money and the reforms that you hope the IMF will undergo is?
AK: At present we are preparing a new stage of the International Monetary Fund quota reform. That means that the International Monetary Fund quotas in budgets of different countries will be re-divided. As a result, there will be an increase in the quota of the developing markets which have become bigger, and fast growing economies will be able to have greater influence on the world economy.
They should have bigger quotas and more votes in the International Monetary Fund decisions. So once the new quotas are created, we think we should increase the International Monetary Fund assets in accordance to the new quotas. And we are ready to allocate more money in proportion to the new quotas. Of course, in this case, the International Monetary Fund will get bigger resources. Thus the International Monetary Fund reform brings in new resources.
At present we provide the International Monetary Fund with resources by means of obligations or new loan agreements. That means that we have to provide temporary resources before reform. The fact that we provide the resources does not prevent the course of reform. We are worried that if a huge amount of resources is gathered, it may postpone the reform, may make it less needed. Our task is to provide the resources right now, when they are badly needed, but at the same time we are to prevent the reform from being postponed because of that. We precondition that the terms are to be fulfilled and the reform is necessary.
RT: Two more questions. Are you satisfied with the time frame that has been decided for the reform of the IMF and the World Bank?
AK: Yes, I think that the terms of the reform are quite adequate and there is enough time to prepare and settle the most difficult problems.
RT: And the last question: You are predicting that Russia will come out of recession. When exactly will it happen? In the third quarter of this year? Are you a v-shape recession or a w-shape recession man?
A: Our estimate is that July and August’s figures suggest that in the third quarter of this year we’ll see a GDP increase in comparison to the second quarter.
That means that we are overcoming the recession. Accordingly, the trend is good and we hope that it will be constant so that we will have an L-shape or v-shaped recovery.
But at the same time, there are many risks that have emerged in the world economy, which in my opinion and in our opinion have not been settled yet. At the moment nobody can say whether they will cause further recession or when they will be solved. That’s why many politicians and analysts still say that the situation is unclear. When you hear such a statement you should understand that despite indications of recovery, everybody is afraid of the new wave of the crisis. That’s why I can’t tell you for sure what the scheme of the recovery will look like. We all are worried now, and we all hope that it won’t happen.