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. Last Updated: 07/27/2016

Dubinin Draws Line at Higher Spending

Russia's Central Bank chief Thursday supported a proposal by Interior Minister Anatoly Kulikov to postpone rebuilding Chechnya until after the fighting has ceased, but drew the line at increased spending measures that would drive inflation.


"We must not agree to these steps because they will destroy the anti-inflation policy," bank Chairman Sergei Dubinin told a press conference, Interfax reported. "We would be doomed to a lengthy period of high inflation which I do not wish on anyone."


Dubinin was responding to comments by Kulikov earlier this week, in which he broached renationalizing some top companies and raising money for Russia's armed forces by raiding the Central Bank's $12 billion hard-currency reserves.


Other senior government officials, including economics chief Vladimir Kadannikov and presidential adviser Alexander Livshits, have also distanced themselves from Kulikov's proposals.


Dubinin supported Kulikov's proposal to abandon rebuilding Chechnya until a cessation of the hostilities. Chechnya reconstruction was the subject of one of several spending decrees issued by President Boris Yeltsin in recent weeks which are widely viewed as populist measures to boost his chances in the June presidential polls.


But ignoring the country's 1996 budget and spending the bank's reserves would lead to inflation, the bank chairman said. If the government is planning such measures, it should state its intent prior to signing a $9 billion loan currently under discussion with the International Monetary Fund, he said.


"We must consistently advance along the chosen road, because if we sign an agreement with the IMF, we must stand by certain international commitments," Dubinin said, according to Interfax. "All discussions about the acceptability of high or low inflation must be completed before that."


Dubinin also rejected a Kulikov proposal to nationalize banks, noting that under current law it would cost the country to reimburse bank owners. He added that, should the institutions be expropriated, many banks would be happy to transfer their debt to the government.


Separately, Alexander Kazakov, newly appointed head of the State Property Committee, said in an interview with Interfax that renationalizing companies would be a net loss for the state and enterprises would perform no better under state control.