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. Last Updated: 07/27/2016

EDITORIAL: Public Cash Needs More Transparency




From a straightforward economic point of view, Finance Minister Mikhail Kasyanov's statement on Thursday that Russia has been secretly tapping commercial banks to finance its budget had little to recommend it.


By issuing bonds to commercial banks to raise funds, Russia has essentially been printing money to pay its bills - then hiding its tracks to avoid fueling inflationary expectations.


However, it was to be expected that Russia would turn on the printing presses at some stage. Even with tax revenues up, the country's almost total exclusion from international sources of financing - and the lack of a domestic debt market - was always going to land the Kremlin in a bind.


The government has had to choose to either print money or slash spending in a budget that is already fairly tight. Neither choice is easy; probably a little of both is inevitable.


Of far more concern is the scheme's clandestine nature - and the Finance Minister's consistent refusal to offer information about what are supposed to be public finances.


On Thursday, Kasyanov refused to give an accurate rundown of precisely where Russia had borrowed money from this year - at a press conference held ostensibly to do precisely that.


He also expressed indifference toward getting to the bottom of a $900 million discrepancy between his estimate of state borrowings and information released earlier in the day by his own officials. Apparently $900 million here or there doesn't matter.


By contrast, the Finance Ministry earlier this year reportedly claimed that it lacked the basic office supplies - chiefly fax paper - necessary to provide a member of the State Duma budget committee with information on the tens of billions of dollars that Russia owes to its foreign creditors.


From the finance ministry to the Central Bank, through to Sberbank - and its insistence that an audit requested by the IMF would somehow compromise its commercial secrets - this nation's governing elite is addicted to secrecy regarding their dealings with the public purse.


The consequences of such murky dealings came to light this week when the government agency for restructuring credit organizations, or ARKO, lifted the lid on what was left of SBS-Agro Bank.


The government and the Central Bank had poured hundreds of millions of dollars - no one knows how much exactly - into keeping the bank afloat over the past 18 months or so. At the end of that period, almost all of the bank's assets have been moved elsewhere, creditors face an uphill task to get back their money and the state faces an expensive task to clean up the mess.