Putin plans spending spree to speed up recovery

Paris/Moscow — Vladimir Putin wants to get Russia’s economy growing again after the pandemic with a burst of spending. His government is working overtime to find the money to pay for it.

Just what the Kremlin leader has in mind is being kept secret until his annual address to the nation on April 21. But officials led by Prime Minister Mikhail Mishustin are already considering several possible ways to come up with the cash, according to people familiar with the deliberations.

Options include tapping the government’s $182bn rainy-day fund, easing spending restrictions under a self-imposed fiscal rule, diverting money from other projects and raising taxes, one person said.

The efforts are so hush-hush that much of the work is being done in a hi-tech basement war room across the Moscow River from Russia’s White House government headquarters jokingly known among insiders as “the bunker”. Requiring digital face-recognition for entry, the facility lets Mishustin and his team collect vast amounts of data from across the government and break down bureaucratic silos to speed decision-making, these people said.

Though Russia’s economy did not shrink as much as many others during the pandemic last year, the Kremlin is eager to speed up the recovery, especially with parliamentary elections due this fall and support for the ruling party flagging amid falling incomes.

A spokesperson for the government did not respond to a request for comment on the spending plans.

The new programme is likely to include a combination of infrastructure spending to boost investment and welfare and other benefits to help compensate the slump in incomes, officials said. Putin has already ordered the government to select projects ranging from high-speed rail to bridges and ports to get as much as $13bn from the wealth fund starting this year. How much money the Kremlin will spend remains the subject of heated debate, according to the people close to the discussions.

The Kremlin wants to hold huge reserves to protect itself in case of new Western sanctions. The US is preparing new measures expected to be announced as soon as the next few weeks. A Russian troop build-up on the border with Ukraine in recent weeks has added to tensions, helping push the rouble to the lowest levels since November.

The central bank has already warned that too much new spending could force it to accelerate interest-rate increases as inflation surges above target. The current budget plan calls for reducing spending this year and next to reduce the deficit that grew amid last year’s pandemic-stimulus efforts.

For Mishustin, who got the prime minister post just a few months before the pandemic hit, the latest effort is a chance to get back to the economic-development focus he had hoped to make a priority. Known for using computer technology to overhaul the bureaucracy at his previous job as chief of the tax service, he is also pushing for hi-tech improvements this time.

Bloomberg