Govt bonds could be used again to recapitalize banks - Kudrin
MOSCOW. Oct 18 (Interfax) - The instrument of bank recapitalization with injections of OFZ federal government bonds could be used again, former Finance Minister Alexei Kudrin said.
"We still have the resolution in regard to recapitalization of banks through the injection into capital of debt instruments of the Russian Federation. I think this is a tool that could show its worth again if needed," Kudrin said at the Mosinterfin conference on Tuesday.
Speaking about the lessons of the 2008 crisis and how the economic situation today differs from the pre-crisis years, Kudrin said experience has been gained in crisis management, tools have been found, including guarantees on the interbank market and guarantees for increasing the capital of banks.
At present there is no such overheating in certain sectors as was seen prior to 2008 in terms of borrowing growth, Kudrin said. In some years loans in some sectors grew by as much as 50%, he said, adding that this primarily happened in sectors such as trade, finance, real estate and communications.
In the past two years, however, there has not been such dramatic growth of loans, with lending in the economy expanding by 12% in 2010 and 13% in the first half of 2011.
There is also less dependence on foreign loans, Kudrin said. As a result, "the Central Bank is pursuing a more flexible course and will react more boldly to changes in the balance of payments that before due to a number of circumstances, including the external position of the banking system," he said. "There is no such problem now."
Kudrin also said inflation has now slowed to about 7% from 13% on the eve of the crisis in 2008. Due to the high inflation in 2008, lending rates shot up to 20% or more, but now there might not be such a danger," he said.
However, compared to 2008, there are a number of weaknesses in the government budget and the macroeconomic situation, Kudrin said. While in 2008 budget spending amounted to 18.3% of GDP, the planned spending in 2012 will amount to 21.6% of GDP. Balances in the Reserve Fund and National Wealth Fund stood at 16% of GDP at the beginning of 2008, but will down to 8% of GDP by the start of 2012. The government debt, meanwhile, has more than doubled from 6% of GDP at the start of 2008 to an anticipated 13.2% of GDP at the beginning of 2012.
The spending growth has been driven in large part by military spending, which will expand by 1.3% of GDP in 2012, by 2.4% of GDP in 2013, by 3% of GDP in 2014 and by 4% of GDP in 2015, Kudrin said.
"And these are just military expenditures. Of course in these circumstances I do not think they are justified. The growth is creating considerable problems for expanding development of other items and sectors," Kudrin said.