The Central Bank of Russia: a friend or an enemy?

Published: December 9th, 2014

This year the Central Bank raised the discount rate 4 times, and today’s rate is more than 70% higher than the one that was installed in the beginning of the year. This led to the collapse of the rouble and became a trigger to output huge funds from the country.

Is there any possible alternative to monetary policy of the CB RF? How to stop currency speculation? Why it is not profitable for banks to finance production now? How the Central Bank can stimulate economic growth? Finally, how to stop currency speculations? MEF experts discussed it today, 9 December, in the President Hotel.

In the event of MEF section, called “the Central Bank of Russia: a friend or an enemy?”, was attended by prominent scientists, businessmen, politicians and public figures, among which: IMF Executive Director from Japan Daisuke Kotegawa, First Deputy Chairman of the State Duma Committee on industry Vladimir Gutenev, First Deputy Chairman of the State Duma Committee on budget and taxes Oksana Dmitrieva, Director of the Institute of Globalization Problems Mikhail Delyagin, Advisor of the Russian President Sergey Glazyev and many others.

The moderator of the discussion was the President of Industrial union “New Commonwealth”, co-Chairman of the Moscow Economic Forum Konstantin Babkin.

Vladimir Gutenev said during his speech that the fall of the rouble caused severe damage to the accumulation of our citizens, and severely undermined the ability of enterprises to import substitution, and also advised to borrow the experience of China: “We see what China undertakes — reduces the refinancing rate during economy slowdown”.

Oksana Dmitrieva noted that the Government has done everything to create and stimulate costs inflation in connection with the increase of the tax burden from export duty for the tax on mineral resources extraction: “One trillion three hundred billion of additional tax burden on production is not so easy to bear, it is not comparable with anything that we had previously experienced. And then the CB RF will start to fight with this costs inflation as if it was the demand inflation”.

Chairman of the Board of Directors of the National Union of Milk Producers Andrey Danilenko in his speech explained how deplorably the policy of the Central Bank affects performance of the real sector: “The main problem in development of domestic production is the cost of credit resources, which has always been the limiting factor. More than 70% of the funds allocated by the state for agriculture, is spent on subsidizing the banking system”.

Mikhail Delyagin called the current situation in the economy the third crisis and expressed his expert opinion about the actions of the Central Bank of the Russian Federation, aimed at curbing inflation: "Mrs. Nabiullina wants to influence inflation when inflation is determined by arbitrariness of monopolies in Russia, not the money mass, and this is proved experimentally. This year, fiscal policy tightened by three times, inflation has increased by 1.5 times. Therefore, when the Bank of Russia says that it wants to be responsible for inflation, it is approximately the same as if Vladimir Putin said: “You know, dear friends, I really like you and thank you that you have chosen me, but I don't want to be responsible for Russia, I am responsible for Cambodia now — it is about the same thing by the degree of adequacy”.

All the participants of the Section unanimously agreed that the current policy of the Central Bank increases risks in the banking sector and in the economy as a whole, promotes inflation, kills the production and leads to loss of working places in Russia.

According to the results of Section MEF experts formulated proposals to the Government of the Russian Federation and to the Bank of Russia to encourage the development of financial tools for economic growth and import substitution.