Russia will cut back authorities help to the financial system in 2021

© Reuters. FILE PHOTO: Russian Finance Minister Siluanov comes to Moscow for talks with representatives of major Russian companies

By Darya Korsunskaya

MOSCOW (Reuters) – Russia will reduce its government support to the economy in 2021 and keep an eye on the rising cost of servicing burgeoning national debt in anticipation of responding to the COVID-19 pandemic and collapse in oil prices, Finance Minister Anton said Siluanov.

Running out of options to strengthen public finances, Russia more than doubled its domestic debt, raised some taxes and increased government spending in 2020 as it relaxed its fiscal rule protecting the economy from external shocks.

Russia's additional government spending to support the economy this year hit 4.5% of gross domestic product and will shrink to 1% of GDP in 2021, Siluanov told reporters in comments released for publication on Tuesday.

Still, state development bank VEB could buy preferred shares in Russian state railways to provide them with funds for their investment program, Siluanov said.

Siluanov shrugged off the World Bank's proposals that the Russian authorities could opt for more gradual fiscal consolidation than currently planned.

"If we continued the same policies as we did this year, we would be pulling the money out of the economy … We can't pull all the liquidity out of the market and fund the spending," said Siluanov.

The Treasury Department raised nearly 5.3 trillion rubles ($ 71.89 billion) through the sale of OFZ government bonds in the domestic market in 2020, with the bulk of the bonds purchased from major banks affecting the ruble's liquidity in the interbank system.

Russia must return to the budget rule in 2022, said Siluanov, referring to the budget system praised by the IMF and the World Bank.

"If so, we can't keep our expenses high all the time," said Siluanov.

"We have a responsible policy unlike other countries that are flooding their economies and will flood their economies with money."

Russia's debt ratio has already reached 20%, the level that the Ministry did not want to exceed, and debt servicing spending will increase from up to 800 billion rubles this year to 1.4 trillion rubles in 2023.

Russia has no plans to raise taxes, Siluanov said, repeating the same line from previous years, but that didn't stop Russia from raising taxes in 2020 on some sectors and on Russians who earn more than $ 67,800 a year .

The global rebound in oil prices will help Russia run a budget deficit of 3.9% of GDP in 2020, down from the 4.4% previously forecast, Siluanov said.

($ 1 = 73.7268 rubles)

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