Russian authorities need to spend about 800 bln rubles ($12 bln) yearly to finance structural reforms in healthcare, education and science, Deputy Chief Executive Officer of Russia’s VEB Bank Andrey Klepach told TASS in an interview on Friday.
“These are additional expenses from 1% to 2% of GDP, approximately 800 bln rubles ($12 bln). This is the price of reforms to be implemented in healthcare, education, and science development,” Klepach said.
According to Klepach, it may be worth for Russian authorities to keep the budget deficit at the level of 2-3% of the GDP to have an opportunity of financing structural reforms. Deficit-free budget for Russia is unreal if the government wants to fund the economic development, he said.
“The budget deficit should be lowered and the deficit-free budget should be achieved from standpoint of the Finance Ministry. I believe such policy will not make possible to implement any required structural reforms, to say nothing of growth acceleration, because they cannot be financed. In my opinion, the deficit of 2-3% of the GDP [is needed] for several years to implement the reform. The situation may change, economic growth may create an opportunity of lowering the budget deficit to 1-1.5% but I think the deficit-free budget is unreal for us,” Klepach said.
Agricultural sector fund
The official has pointed out that an agricultural fund can be set up in Russia to provide medium businesses with loans.
“Funds for investment projects [in addition to the Industry Development Fund – TASS] should also be established. A similar fund may be set up in agriculture, which will extend loans at 4-5% [annual interest rate], probably not for major projects but for medium businesses,” Klepach said.