MOSCOW (Reuters) – Russian President Vladimir Putin has expressed concern over the rising inflationary risks and has instructed the government and central bank to take control of the situation. This issue is particularly significant for Putin as he prepares for his expected re-election bid in March next year for another six years in the Kremlin.
Additionally, Russia’s budget has been strained due to its “special military operation” in Ukraine, prompting the central bank to increase interest rates last week to stabilize the declining Russian ruble.
“The tasks we are facing and continuing to tackle are truly exceptional in terms of their scale and complexity,” emphasized Putin during his televised remarks to government officials.
He stated that while the overall situation is stable, it requires diligent monitoring and timely decision-making.
Following double-digit inflation in 2022, the pace of price increases dropped during the spring. However, inflation has once again surpassed the central bank’s 4% target and is progressively rising.
Russia’s expanding budget deficit and severe labor shortage have contributed to the continuous inflationary pressure throughout the year. When the Russian ruble fell below 100 to the US dollar last week, the central bank responded by raising interest rates by 350 basis points to 12%.
Consequently, the ruble subsequently experienced a significant strengthening, aided by exporters increasing the conversion of their foreign currency revenue following discussions with Russian authorities.
Putin highlighted that financial market volatility has impeded companies’ investment decisions and must be brought under control. He insisted that the government and central bank actively employ the available instruments, including curbing unproductive speculative demand, monitoring capital outflows, and overseeing the behavior of major financial market participants.
The Russian President also emphasized the importance of maintaining a high level of industrial output for the country.
While rising military costs have supported Russia’s modest economic recovery this year, contributing to higher industrial production, they have also resulted in a budget deficit of approximately $29 billion due to declining export revenues.
Putin mentioned that the budget is projected to have a surplus for July to September and emphasized that the expenditure will exceed the income by the planned level, equivalent to around 2% of GDP for the entire year.
(Reporting by Vladimir Soldatkin, Anastasia Lyrchikova, and Dmitry Antonov; writing by Alexander Marrow and Mark Trevelyan; editing by Mark Heinrich)
Credit: The Star : News Feed
