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. Last Updated: 07/27/2016

On Economic Logic

Mikhail Zadornov, chairman of the State Duma committee on the budget, taxation, banks and finance, shares his views on the current economic situation and what needs to be done to avoid further crises.

In the present government an opinion exists that two factors -- low inflation and political stability -- will bring about economic growth. They believe that these two elements will automatically induce a flood of internal and foreign investment, and at the beginning of next year we will see the beginning of global economic growth.

This logic is not quite in synch with the real situation. The economy is now engulfed by crises in a number of spheres. The budget crisis continues, a crisis in the system of exchanges between economic agents develops, unemployment is on the rise and, finally, the climate for investment continues to worsen.

First of all, the yields on major financial instruments (T-bills and interest on the Central Bank's refinancing) will have to be lowered to the point of being at least comparable to yields on investment in production.

Tax collection must be improved, but this will not be possible without major institutional changes in the structure of the government itself and fiscal departments.

The present situation demands the adoption of these measures immediately.