Q What measures will the Russian government take to reduce the budget deficit, and when do you feel the country’s economy will be strong enough for a tighter budget?

A In 2009, we were expecting the budget deficit to reach 6.4% of GDP, a figure revised downwards from the 10% initially foreseen, so the budget execution surpassed our expectations. Largely, this is the result of higher oil prices, but also of our anti-crisis ­policies and the return of confidence to various segments of the economy. With it now picking up, the budget deficit will again be lower in 2010.


However, we need to remain cautious, as the growth signs may prove to be too fragile. Hasty fiscal tightening may undermine the progress which we have achieved so far. Admittedly, we are fortunate to be in this position: over the past 12 months the government did not accumulate any debt, and we still have a significant portion (equivalent to more than 5% of GDP in 2010) of our reserve and national welfare fund in place. While we understand that this cushion is not endless, we will find the balance between tightening the budget and allowing economic growth to resume. Having said that, we will have to be conservative in building our fiscal policy in the future, and the issue of budget expenditure optimisation will continue to warrant significant attention. Tighter fiscal policy would also be helpful to bring inflation down.

Q How tough is the government prepared to be to enforce higher capital requirements on the banks? Would you be ready to shut down large numbers if they fail to raise their capital?

A We are prepared to be very tough and are fully aware of the necessity to make the banking system stronger and better capitalised. There are, in fact, no political obstacles to this process. Our deposit insurance agency proved efficient in stepping in during critical situations. Overall, the Russian banking sector has no systemic problems with non-performing loans, excessive leverage or capital adequacy requirements. Russian banks’ balance sheets were not overloaded with so-called toxic assets. Capital ratios of more than 20% are common in Russia. But yes, when banks do fall short of the requirements we will take appropriate steps, requiring mergers or closures of such banks.

Q Russian companies have proved to be very vulnerable to international credit markets – do you plan policies to help develop more active local credit markets?

A Absolutely. Bringing down inflation and improving the stability of the banking system are already steps in the right direction. We will also be promoting the creation of long-term domestic savings – via the development of a private pension and insurance industry. The government and the Central Bank of Russia will continue developing the domestic debt market, recreating the benchmark yield curve. The crisis has also revealed the imperfections in legislation concerning the protection of creditors’ rights and we are working to correct them. Reviving the market is a matter of restoring confidence and building a proper market infrastructure. This process takes time, but I can assure you, it is a task we take seriously.

Q President Medvedev spoke at his inauguration of ending “legal nihilism” in Russia – do you feel progress has been made, and what needs to be done to attract additional investment, especially in poorer regions?

A We view ‘legal nihilism’ not only as a major obstacle to investment, but as a larger problem, too, influencing many aspects of life in Russian society. I believe we should not underestimate our efforts, despite the fact that the results might not be seen immediately. We also did not see any decline in the workload of Russian courts since the start of the economic crisis – suggesting that businesses and individuals continue to rely on the judicial system to resolve conflicts. We recently introduced amendments to legislation, requiring court procedures to become more transparent, clearer and more understandable to participants. We are making significant steps in the right direction.

As for attracting investment, apart from improving the judicial system, we believe that development of infrastructure and the reduction of administrative pressure on business are of critical importance. The measures we have introduced in this area over the past few years, predominantly to support small businesses, have been welcomed and we will continue working in this direction.


Arkady Dvorkovich

2008Russian government

Economic advisor to the Russian president

2004Expert group of the Russian president


2001Expert group of the Russian president

Deputy minister for economic development of Russia

2000Russian government

Advisor to the minister for economic development of Russia