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22.10.08
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Is There A "Plan B"?
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Comment by Georgy Bovt
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The public's first reaction to the emergency anti-crisis measures taken by the Russian authorities was, on the whole, favorable. The expert community also largely approved. The methods used by the Russian authorities are not that different from the same emergency measures taken in these difficult times by the financial authorities of the United States and Europe: urgent monetary infusions aimed at increasing the liquidity of the bank system; reorganization of the most significant banks (to the point of their de facto nationalization) aimed at preventing a domino effect in the financial and credit markets; increased state guarantees on private deposits aimed at reassuring the depositors.
However, questions of a different nature began gradually arising: what measures must be taken not in the short-term, but in the middle- and the long-term? How wide must the level of participants of the elaborate financial and economic solutions be, so that, first of all, the efficiency of such solutions is increased, and, secondly, the room for corruption is minimized, since some of these decisions can be made surreptitiously in favor of certain corporations that are connected to certain high-ranking governmental officials?
Last week, the State Duma hastily passed multi-billion ruble decisions in the first reading. One hundred and fourteen billion rubles will be taken from the investment fund to increase budget expenses in 2008. The overall state budget expenses will be increased by 172.3 billion rubles. Apart from the investment fund decrease, 41.9 billion rubles will be saved on servicing the national debt and on realizing federal special-purpose programs. Another 16.1 billion will be salvaged by redistributing the funds between the years 2008 and 2009.
This money will be spent on increasing the capital stock of the national Vnesheconombank and the Agency for Housing Mortgage Lending. This being said, the banks have already been allotted 950 billion rubles for providing subordinate loans for ten-year terms; the Central Bank has been granted the right to issue credits to commercial banks without collateral for six-month-long terms; the threshold for deposit insurance has been raised to 700,000 rubles.
It is widely known that there are over 1,000 banks in Russia today. Many of them play certain roles in their regions; many are rather artificial financial formations or, bluntly speaking, "laundry facilities" for money. About one hundred Russian banks have investment rating scores. During the initial stage of taking anti-crisis measures, only three national banks received state support—these banks were supposed, as it was publically announced, to "help" other banks by granting them credit. The "help," however, did not happen: national banks acted like business structures, raising loan values to unacceptable heights. Thus the inefficiency of the previously-made decision became obvious. Which criteria will now be applied for determining the banks worthy of state support? This is generally still unclear, which gives us reason to suspect that the mechanism of selective state support might end up being ineffective at best, if not corruptive.
So far, the decisions made by Russia's financial authorities demonstrate no clear or well-defined course toward supporting and stimulating production, for example, in the form of guaranteed credit for businesses, including small and medium-sized ones. Lobbyists from the largest private and state-controlled corporations, on the other hand, are using all opportunities to lobby allocation of huge funds for refinancing of their external debts. What grounds are used to evaluate the necessity and efficiency of decisions about such support? How wide is the circle of independent experts involved in the decision-making process? Given the status quo, the latter question can probably be seen as purely rhetorical.
Alas, the Russian parliament is not the place to conduct high-quality expert evaluations of the multi-billion decisions being made today. The government's suggestions are usually not subject to doubt or verification. They are accepted and passed automatically. For example, the Duma has not yet displayed any initiative somehow attempting to adjust and correct next year's budget, at least in view of the rapidly falling oil prices. Russia's budget for next year is still based on oil prices that do not exist on the market anymore – they are already much lower.
And what will be the quality of the decisions being made if the economic situation continues to worsen? What if there will be a need to reconsider the multiple social obligations? What if millions of Russia's citizens get laid off and the point of contention will be paying them unemployment compensation or organizing communal and public services? So far, all of these questions – for the day after tomorrow – are not even raised; the legislators prefer to go with the flow, secretly hoping that the main decisions will be made for them by the intelligent analysts from Wall Street, as well as from the European Commission, thus calming down the market in one way or other. And what if this does not happen? Does Russia have a "Plan B" for this scenario? |
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