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. Last Updated: 07/27/2016

Kudrin Accepts Blame for 'Stupid Mistakes'

ReutersKudrin taking a seat at a World Bank meeting in Washington on Sunday.
Russia is guilty of committing economic policy blunders, Finance Minister Alexei Kudrin was quoted as saying on Monday, taking the blame for failing to convince the government to take a more sensible course.

"The government is making stupid mistakes," Kudrin told Rossiiskaya Gazeta in an interview. "I am responsible -- just as all government members are. That means I was not able to convince the government to do the right thing."

Kudrin gave his assessment after losing a budget battle to Prime Minister Mikhail Fradkov, who wants to double public sector pay and pensions by 2008 to drive growth.

Kudrin reluctantly backed a decision to raise the cut-off level at which windfall oil revenues flow into a fiscal stabilization fund to $27 per barrel from next year from the current $20, despite misgivings that pumping up spending may stoke inflation.

Kudrin set up the stability fund to ring-fence the economy from some of the petrodollars it is earning, thus preventing an unsustainable inflationary boom.

He hopes to strike a deal in May to repay early over $10 billion that Russia owes to Paris Club sovereign lenders out of the stability fund surplus.

"Economic policy is now drifting toward an increasing role of the state, reducing liberalization in certain sectors and weakening financial policy," Kudrin told the newspaper.

"For the second year running we are not reducing inflation -- even though we could. We need to take timely steps to remove factors which support price growth. But we are taking steps in the opposite direction, preserving inflation."

Inflation spiked at the beginning of 2005 after totaling 11.7 percent in 2004, and the government now expects it to stay in double digits for the rest of the year.

Kudrin and Economic Development and Trade Minister German Gref have long been at loggerheads with Fradkov, but despite their ill-tempered relationship, there is as yet no sign that either might quit the Cabinet.