Government is becoming the weakest partner in building Russia’s economic strength, says former finance minister Alexei Kudrin, citing excessive military spending and criticizing the funding of Pension Fund’s deficit.
The state was taking on too many obligations, unable to fulfill them, Kudrin told an economic forum in the Siberian city of Krasnoyarsk on Friday.
“Sources for growth are being sought. One of the growth factors should be a modern budget structure plus well-balanced government commitments,” he said.
But plans for higher military expenses took the wrong path, Kudrin assessed. Within three to five years, the government was set to allocate 20 trillion rubles ($553.38 billion) on defense procurement and another 12 million rubles ($332 thousand) for the material support of servicemen. Another 2.8 trillion rubles ($77.47 billion) a year would be spent on security measures, he said.
“All this is done instead of investing into infrastructure and human capital,” he complained, noting that under this scenario, Russia’s economic growth would reach only 1.5%, not the government’s expected 3.5%.
Financing the Pension Fund shortfall was also irrational, Kudrin said.
“For this purpose, the government injects two trillion rubles. An increase in the retirement age could in many respects resolve this problem and influence economic growth,” Kudrin said.
Regions’ investments into infrastructure had been declining by 200 billion rubles ($5.53 billion) a year, he added. The cost of sub-federal loans would grow and return on regional securities would increase, causing a rise in the cost of debt for the private sector, the former minister said.