The Economy Ministry has pulled together a set of anti-inflationary proposals, that are likely to be controversial at best, and rejected outright at worst. In part playing the role of provocateur is not an unusual one for Economy Minister Gref, but the reaction to these proposals will provide interesting insight as to whether there has been any real change as a result of the recent reshuffle.
The proposals are almost a laundry list of mostly very good measures that the government needs to take, although short of the structural reforms that would transform the economy. Needless to say we are not overly optimistic that they will actually pass.
In setting the stage for what will be a major battle if taken seriously, the Economy Ministry has taken the unusual step of already revising the 2006 inflation forecast from 7-8.5% to 8.5%, while further announcing that inflation could come in as high as 9.5-10% next year. The CBR does not agree with these revisions.
The proposals are a mix of mostly eminently sensible suggestions and some that are an extension of the types of measures that are in force this year. They include:
--- a proposed fiscal tightening, with no growth in non-interest expenditures (including social spending) in the budget;
--- a reduction in the US$27/barrel oil price cut-off for transfers to the stabilization fund;
--- restrictions on domestic and external borrowing by state-owned companies;
--- the encouragement of increased private savings by the development of capital markets;
--- a proposal to publicly place shares of large state owned companies like Gazprom and Rosneft.
--- A proposed list of housing and communal services that should be regulated, together with limiting the increase in gas prices to 11% and electricity prices to 7.5%.
--- The Economy Ministry's proposals also stretch to monetary policy with a motion to restrict money supply growth to 20%, together with a restriction on the appreciation of the real effective exchange rate to 4.0-4.5%.