Russia Finance Chief Fumes Over Budget Funding for State Economy

Russia needs to reduce the government’s role in the economy and ease the burden state companies represent on the nation’s overextended budget and the economy ravaged by recession, Finance Minister Anton Siluanov said.

“We have a state economy, in essence, and we are now supporting this state economy through the budget, which is absolutely wrong,” Siluanov said at an investment forum in the Black Sea resort of Sochi on Friday. “State companies, which are usually known for their inefficiency, are weighing on the market and prices on the market and create negative economic results.”

Russia is facing a two-year recession after the collapse of oil prices and international sanctions over the conflict in Ukraine. Policy makers are entangled in a debate over the mix of measures to limit and cover a widening deficit. They are evaluating possible steps including a tax increase on commodities, lower social spending and higher domestic borrowing increase.

The ruble has lost about 40 percent against the dollar in the past 12 months, the worst performer among 24 emerging-market currencies tracked by Bloomberg. Consumer prices grew 15.8 percent in August from a year earlier.

As much as a quarter of Russia’s gross domestic product and two-thirds of its exports are linked to the energy industry, according to Moody’s Investors Service.

Large state companies, including gas export monopoly Gazprom PJSC, are hindering Russia’s economic progress, Alexei Kudrin, who was finance minister in 2000-2011, said in Sochi.

“Today we’re essentially facing the problem of large state companies, whose interests are dominant on the market,” Kudrin said.

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