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Inflation Will Come Out from the Curtain
The Finance Ministry has released data on the implementation of the federal budget in the first seven months of the year indicating that the so-called “budget curtain” – the portion of government spending planned for the first half of the year and then postponed to the second half – has grown in comparison to last year and now totals about 10 percent of all spending, that is, 550-600 billion rubles. With Duma elections coming up on December 2, the ministry will not be able to draw out its spending all the way to the end of the year. Inflationary pressure in December can be expected to be significantly higher than last year.
The Finance Ministry has never admitted to using spending delays as an anti-inflationary measure, but economists agree that the practice has that effect. The ministry and the Central Bank are steadfastly refusing to admit the possibility that the government's planned 8-percent annual inflation will be missed again. Deputy chairman of the Bank Alexey Ulyukaev says that the slowing growth of the M2 money mass (to less than 50 percent as of August 10) gives hope that inflation will come to 6.6 percent for the first nine months of the year. That allows for only 1.4-percent inflation in all of the fourth quarter of the year.
Growth of the M2 money mass is slowing because the money supply is shrinking in the country in connection with changes in the influx of foreign currency. That us occurring because of the trade balance is changing and because the influx of hard currency, predicted at $70 billion by the Central Bank in the first half of the year, in reality amounted $65.7 billion.
www.kommersant.com
All the Article in Russian as of Aug. 13, 2007
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