Government expenditure is tied to long-term oil
prices and borrowing is limited to 1 percent of gross domestic
product. However, this system faces criticism at a time when the
economy, hit by Western sanctions over Ukraine, risks entering
"Now it is evident that this mechanism has ceased to satisfy us
fully," Ulyukayev wrote in the daily Vedomosti.
"We have denied ourselves possibilities for stimulating the
economy with the help of fiscal policy at a time when we are
close to recession. When it is necessary to activate measures
aimed at softening the negative consequences from the rise of
Ulyukayev's article is the latest salvo in a battle between
fiscal conservatives, led by Finance Minister Anton Siluanov,
and officials such as Ulyukayev who advocate using looser fiscal
policy to boost economic growth.
Official data released on Friday showed that the economy had
contracted in annual terms in both July and June. This slowdown
coincided with a surge in capital outflows and slumping
investment, linked by analysts to the Ukraine crisis and the
impact of western sanctions.
Western nations have imposed a range of sanctions on Russia over
its role in Ukraine's conflict, with Moscow retaliating by
introducing some trading curbs of its own.
Ulyukayev argued that if the deficit were raised to 2 percent of
GDP, the central bank could help finance it through more active
open market operations, increasing its balance sheet through the
purchase of government bonds from banks.
Russia should also aim to raise more long-term debt finance from
Asia, he argued. If the extra spending was aimed at reducing
bottle-necks in "productive" sectors and infrastructure it would
not be inflationary, he said.
Such views are likely to be opposed by the finance ministry,
which argues that the existing caps on spending and borrowing
should be retained given limited financing and the risk of
falling oil prices that could hit budget revenues.
(Reporting by Jason Bush; Editing by Crispian Balmer)
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