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. Last Updated: 07/27/2016

Ministry: Inflation to Keep Level


Senior Finance and Economics Ministry officials said Thursday that inflation will stay at 6 to 7 percent a month for the rest of this year -- well above the level Russia promised the International Monetary Fund in April as part of a $6.7 billion standby-loan deal.

But a drop to 1 to 2 percent in 1996 is realistic, said Deputy Economics Minister Yakov Urinson.

The monthly inflation rate fell to 5.5 percent in July from 18 percent in January, but remains considerably higher than the 1 to 2 percent it had pledged for the second half of the year in the agreement with the IMF.

Under the deal, the IMF is conducting a monthly review of Russia's economic progress and reserves the right to withhold tranches of the loan.

Economics Ministry officials said last week that the government had underestimated the effect on prices of inflationary expectations, liberalized domestic oil prices and a rapid increase in the supply of cash rubles which were printed to replenish the Central Bank's hard-currency reserves.

Urinson told reporters Thursday that the government would try next year to limit price increases by so-called natural monopolies -- like Gazprom -- which he said were a major source of inflation.

Urinson was speaking after a government meeting that approved the latest version of Russia's draft 1996 budget, which has trimmed spending and revenue plans considerably and envisages a budget deficit of just 3.9 percent of gross domestic product

"Virtually no one argued against the cut in income, but everyone quarrelled over the cuts in spending," Finance Minister Vladimir Panskov said, adding that the revision had left spending on the army, law enforcement and social programs intact.

The revised 1996 budget puts expenditures at 410 trillion rubles ($93 billion) and income at 329 trillion rubles for a deficit of 81 trillion rubles.