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Russian Federation: Staff Report for the 2009 Article IV Consultation Informational Annex

Author(s):
International Monetary Fund
Published Date:
August 2009
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Annex I. Russian Federation: Fund Relations

(As of May 31, 2009)

I. Membership Status: Joined 06/01/1992; Article VIII.

II. General Resources Account:

SDR MillionPercent of Quota
Quota5,945.40100.00
Fund holdings of currency4,951.4183.28
Reserve position994.0816.72

III. SDR Department:

SDR MillionPercent of Allocation
Holdings1.98n.a.

IV. Outstanding Purchases and Loans: None

V. Latest Financial Arrangements:

TypeApproval DateExpiration DateAmount Approved (SDR million)Amount Drawn (SDR million)
Stand-By07/28/9912/27/003,300.00471.43
EFF03/26/9603/26/996,305.571,443.45
Of which SRF07/20/9803/26/993,992.47675.02
EFF03/26/9603/26/996,901.004,336.26

VI. Projected Obligations to Fund: None

VII. Implementation of HIPC Initiative: Not Applicable

VIII. Implementation of MDRI Assistance: Not Applicable

IX. Exchange Arrangements: The de jure arrangement is a managed float with no pre-determined path for the exchange rate. The Central Bank of the Russian Federation (CBR) sets and announces the official exchange rates of foreign currencies against the ruble on a daily basis. These rates are based on ruble quotes against the dollar on the internal foreign exchange market and on quotes of other foreign currencies against the dollar on the global exchange market. The CBR intervenes in both interbank currency exchanges and the over-the-counter interbank market to limit fluctuations in the exchange rate of the ruble against a basket of the euro and dollar in the short run. The dollar is the main intervention currency. As a result of the stability of the ruble against the Euro-dollar basket, the de facto exchange rate arrangement was classified as stabilized arrangement between April 30 and November 1, 2008. Since November 2008, the CBR has instigated frequent depreciation of the ruble against the Euro/dollar composite, while also allowing larger day-to-day fluctuations. On February 9, 2009, the CBR established a trading band for the ruble. After stabilizing at the upper edge of the band, the ruble fluctuated inside the band as a result of the CBR intervention. Therefore, the exchange rate arrangement has been reclassified to other managed arrangement effective November 1, 2008. The Russian Federation accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement with effect from June 1, 1996, and maintains an exchange system free of restrictions on the making of payments and transfers for currents international transactions.

X. Article IV Consultation: Russia is on the standard 12-month consultation cycle. The last consultation was concluded on August 1, 2008.

XI. FSAP Participation and ROSCs

Russia participated in the Financial Sector Assessment Program during 2002, and the FSSA report was discussed by the Board in May 2003, at the time of the 2003 Article IV discussion (IMF Country Report No. 03/147). An FSAP update took place in the fall of 2007, and the FSSA report was discussed by the Board in August 2008, at the time of the 2008 Article IV discussion.

A Fiscal Transparency ROSC mission, headed by Peter Heller (FAD), visited Moscow in July 2003, and a new Data ROSC module was undertaken by a mission in October 2003, led by Armida San Jose (STA).

XII. Resident Representatives:

Mr. Odd Per Brekk, Senior Resident Representative, since March 1, 2009.

Annex II. Russian Federation: Relations with the World Bank Group

1. World Bank Group activities in Russia are currently guided by the three-year Country Partnership Strategy (FY07–09) which was endorsed by the Bank’s Board in December 2006. This productive and innovative period in the relationship is coming to a close. The next phase, from FY10–12, will build on many solid achievements. Details of the engagement are now under discussion with the Russian Federation but are likely to rest on (i) extension of the existing program, and (ii) possible new Bank support to the Government’s anti-crisis and broader modernization agenda.

2. Extending the existing program would entail more intensive use of new instruments that leverage the World Bank Group’s knowledge, project management skills, private sector expertise and AAA rating. In particular, the use of guarantees is expected to grow to help reduce the cost of borrowing in capital markets for public financing of infrastructure. The Federal Government is also expected to conclude the first text case of the “new modalities.” These are projects financed under a Russian Federation budget line, together with fee-based services for project appraisal and implementation or technical assistance operations, at the federal or sub-national level.

3. Given pressure on Russia’s fiscal reserves and external position due to the global financial crisis, the Russian Federation might seek some new financing from the World Bank to modernize the economy, increase the efficiency of public expenditures, and strengthen the position of Russia in the post-crisis period. Themes are likely to include the effectiveness of public expenditures, social programs, support to vulnerable groups, and management of sub-national public finance.

4. Substantial developmental challenges remain in a large number of Russian regions remain. As in the previous CPS, the federal government has encouraged the Bank Group to deepen its direct involvement in the regions. Correspondingly, a central theme of the extended CPS will continue to be in select regions, including economic analysis (growth and business environment diagnostics), regional development strategies, and related investment projects. Sub-national borrowing and new fee-for-service arrangements for investment and policy advice are likely to remain at current levels due to fiscal and liquidity constraints in the regions. IFC and MIGA operations are in very high demand yet face headroom constraints (Russia is IFC’s and MIGA’s largest exposure).

5. The new CPS period will continue to serve the realization of four primary objectives: (a) diversifying the economy for sustainable development and growth (formerly, “Sustaining Rapid Growth”, (b) improving public sector management and performance, (c) improving the delivery of social services, and (d) enhancing Russia’s global role. The first three pillars correspond closely to the pillars of the previous Country Assistance Strategy (CAS), and channel support directly toward the development challenges and policies elaborated in the government’s Medium-Term Economic Program, with a particular focus on the regions. The fourth pillar forms the basis for a new area of assistance, and concerns Russia’s integration in the world economy and donor community.

Major areas of Bank Group activities by CPS strategic pillars

(a) Diversifying the economy for sustainable development and growth

6. The World Bank Group will assist Russia in various ways in meeting the challenges of sustaining rapid growth, including participation in macro-policy debates, monitoring the investment climate, supporting public investment and PPPs for growth and diversification, working with regions to identify and overcome barriers to growth, supporting investments in priority areas at the regional level, and providing direct assistance to the private sector:

  • Macroeconomic policy, long-term fiscal sustainability, and the effective management of Russia’s large external inflows: The Bank will contribute to the macro-policy debate in Russia through the periodic Russian Economic Reports, on-demand policy notes and knowledge sharing. In addition, there is strong interest in the Bank’s technical assistance in advising on alternative uses for the windfall oil revenues, including the development of an institutional framework for the effective management of a growing diversified portfolio of foreign assets. The Bank has finished a study on long-term fiscal risks and fiscal sustainability. In April 2008, the Bank of Russia and World Bank Treasury formally signed a fee-based services agreement whereby Treasury will provide technical support in internal investment management capacity for a period of 3 to 4 years. In addition, the Bank helped strengthen the financial sector through lending and TA for securities market regulation, financial sector strategy (government assets and liability management, including reserves and stabilization funds management), and insurance and banking sector supervision. On a fee basis, the Bank provided TA to the Central Bank to support payments system development and monitoring.
  • Investment climate monitoring and policy advice: The Bank will continue periodic business environment and enterprise performance (BEEPS) surveys, regional investment climate assessments, and administrative barriers studies undertaken by FIAS for interested regions. The Bank and MIGA can work at the regional level on capacity building and the development of investment promotion programs for attracting FDI, similar to the initiative currently underway in Rostov Region. WBI will continue capacity-building activities related to investment climate assessments.
  • Supporting energy efficiency. The World Bank jointly with the IFC recently completed a study on energy efficiency that provides senior Russian policymakers with a comprehensive and practical analysis of energy efficiency issues in Russia, its potential, benefits, and policy recommendations. At present, the World Bank together with IFC implement an energy efficiency advisory project in the North-West (NW) region of Russia. The project objective is to equip four oblasts of the NW region with methodology and tools to address the regional Energy Efficiency agenda in a comprehensive strategic manner.
  • Supporting Government investment and public-private partnerships (PPPs) for growth and diversification: On-going investment projects support land registration and the development of a national cadastre for securing property rights and the development of land markets. In addition, regular and reimbursable TAs are now being provided to support the development of PPPs across sectors. In particular, the largest Bank’s fee-for-service portfolio belongs to the City of St. Petersburg and includes such large scale infrastructure projects as Western High Speed Diameter, Orlovsky tunnel, NADEX and Pulkovo airport. The Bank would also continue cooperaration with Russia’s Development Bank (VneshEconomBank-VEB) on both PPP joint activities and on potentially providing a partial credit guarantee of the Bank to the VEB in support of its efforts to raise funding for infrastructure investments. In addition, the Bank intends to support efforts of the Higher School of Economics of Moscow to develop an e-learning program on PPP for the audience including federal and regional stakeholder, including authorities and business community, in Russia as well as in several other CIS countries. Another area where the Bank is helping the Government to prepare an investment program is microfinance sector, with focus on financial cooperatives and their integration into the financial system of the country.
  • Working with regions to identify engines of growth, develop growth strategies, and remove barriers to growth and labor mobility: The Bank held two major knowledge events on regional development strategies in early 2008: an early discussion of World Development Report on regional disparities and its implications for Russia, and Regional Development Strategies workshop for Russia’s regional governments and other stakeholders of regional development. In addition, the Bank has finalized a Country Economic Memorandum focused on barriers to growth at the sub-national level and on issues of regional agglomerations. The development of fee-for-service arrangements with the regions would provide another avenue for supporting preparation of regional investment strategies and growth analyses, and provision of other analytical services. Also, the Bank is starting new analytical work on internal migration in Russia as part of a broader, CIS-wide engagement on migration issues and policies.
  • Supporting investments in priority areas at the regional level: The IFC/Bank Sub-National Development Program will support priority regional public investments. The government is interested in developing this financing mechanism further, as it involves direct lending to well-performing regions and municipalities without sovereign guarantees. Three such sub-national operations have been completed to date, including two in the Chuvash Republic and one in Petropavlosk municipality (Kamchatka). In addition, one operation (Mariy El) has been approved by the Board and a credit agreement signed by the client, and another one (Mytischi) is supposed to be approved by the Board by the end of this fiscal year. Infrastructure is also an important area of IFC investments. This concerns primarily transport and logistics, but also includes municipal infrastructure. MIGA can play a role in supporting foreign direct investment in infrastructure at the sub-sovereign level, including in the water and solid waste sectors. Regional infrastructure projects supported by the Subnational Program is another area where the Bank and IFC could partner with VEB for joint project preparation and support.
  • Providing direct support to the private sector: IFC will continue to support Russia’s private sector growth agenda through a combination of financial and advisory services to promote the growth of the private sector and the diversification of the Russian economy. IFC will finance projects (1) with important spill-over effects to other companies, such as infrastructure and financial markets, (2) in sectors where Russia may have a comparative advantage, for example the processing of natural resources and those that promote the knowledge economy, and (3) those increasing the range and quality of products and services available in the Russian market, particularly outside of Moscow. Much of IFC’s activities will remain concentrated in the financial sector, where priorities will be: (i) building long-term relationships with medium-sized independent private regional banks, so as to increase competition and the range of services available to the population. IFC financing, provided in the form of long-term senior loans and, in selected cases, subordinated loans, will help to strengthen the banks’ balance sheets, reach new clients (including SMEs), attract more depositors, and consolidate their position as leading regional banks; (ii) supporting the introduction of specialized banking products, including mortgage financing, consumer finance and leasing; (iii) supporting the process of privatization of state-owned banks, as and when requested by the Russian Government; and (iv) supporting development and use of new financial instruments, such as partial guarantees of local currency bonds and securitization.
  • Continuing IFC advisory work through the Private Enterprise Partnership and FIAS: This technical assistance will address the following objectives: (a) increasing the development impact of investments through strengthening local suppliers and engaging in community development work around large investments; (b) building the capacity of private banks to deliver new product lines, such as mortgage finance and financing for energy efficiency; and (c) improving corporate governance and environmental sustainability through work with banks and real sector clients, including IFC investees. FIAS will continue to work with select regions to improve the business climate by assisting in implementation of policies/instruments to kick-start functioning markets of land and commercial real estate.
  • MIGA will continue to support foreign investors through the provision of political risk guarantees: Supporting foreign investment in infrastructure, in close coordination with the Bank, will remain an important area of MIGA’s activity in Russia. In the financial sector, the Agency will continue to explore opportunities to support capital markets transactions, including asset-backed securitizations. MIGA may also continue to promote the role and assist in the expansion of foreign banks in the Russian banking sector. Areas for potential further involvement in Russia include manufacturing, agribusiness and services sectors.

(b) Improving public sector management and performance

7. Public sector management has been a particular area of strength of World Bank work in Russia, which will be further deepened in coming years. The Bank will remain engaged in supporting programs for modernizing selected public sector institutions, improving government administration, the judiciary, local self-government, and budgetary management at federal and sub-national levels. The Bank will expand its engagement in regions in these areas, in accordance with the federal priority for improving public sector performance at the sub-national level.

  • Modernizing selected public sector institutions: The completion of on-going projects will contribute to the modernization of public institutions and improved public services. These include tax modernization, customs development, cadastre and registration, fiscal federalism, performance-based budgeting, treasury development, and a statistical development project.
  • Supporting the government program in administrative reform: The Bank will continue its close engagement with the government in the area of administrative reform at the federal and sub-national levels, including the coordination and implementation of substantial donor funds. The primary goal will continue to be bringing Bank and international expertise to bear on the implementation of the government’s program for administrative reform, which currently places a strong emphasis on encouraging initiatives at the sub-national level. So far, the Bank has concentrated sub-national work in the Southern Federal Okrug and regions in the North-West. A fee-based advisory service supported Khanti-Mansiysk Okrug-Yugra on administrative streamlining and functional reviews. Similar fee-based advisory services may also be developed with other regions. Support for public administration and governance for selected regions which cannot afford fee-based services is being provided through a DFID Trust Fund which runs from 2007–10.
  • Providing analytical support on effectiveness of public expenditures, transparency and accountability. At the request of the Ministry of Finance, the Bank has started work on a Public Expenditure Review (PER) focusing on the overall structure and efficiency of public expenditures with particular focus on the wage bill, education, and transportation expenditures. This could develop into programmatic exercise in the following years. Relatedly, and in close coordination, it is pursuing a social expenditures review focusing on subnational expenditures on education, health and social assistance.
  • Supporting budgetary reforms: The Bank will continue to respond to the demands of the federal and some regional governments for assistance in budgetary reform and the development of performance-based budgeting. In addition, the Bank will remain a partner to the government in the continued scaling up of the Fiscal Federalism Project (now financed by the Russian government) and its expansion to the municipal level.
  • Promoting the reform of local self-government: The Bank will continue its dialogue with the government in this area, and in brining international experience to bear on this vital area of reform in Russia. A study has been launched for monitoring and assisting the development of local-self government in rural areas in the Perm, Penza, and Adygeya regions. The Bank will seek to engage directly with regions and municipalities in this area on the basis of new modalities, including a discussion of replicating the positive experience of the Fiscal Federalism Project model for building capacity at the municipal level.
  • Investing in municipal development: On-going and possible future regional projects have significance for overall municipal development and the quality of municipal services. This includes the completed Municipal Heating, Municipal Water and Wastewater projects and on-going Saint Petersburg Economic Development Project, as well as the Housing and Communal Services project awaiting for government signature, possible regional subnational projects on water and heating system upgrades, and a proposed Cultural Heritage II project (FY09) aimed to use the cultural heritage and the cultural heritage tourism as a resource for economical and social development in the participating regions. The Stavropol pilot Local Initiatives Support project improves the quality of settlement level social infrastructure and the Bank is working with Ministry of Regional Development on scaling up the program nationally.
  • Stepping up engagement on judicial reform: Assistance on judicial reform also involves the coordination of donor funds and special cooperation at the regional level. A recently approved project, which complements the 2007–11 Federal Targeted Program for judicial modernization, supports judicial reform (FY07) with a focus on improving the efficiency of dispute resolution and the transparency of judicial functioning. A complementary grant from the Government of Japan will provide support to Perm Krai and Leningradskaya Oblast on demand-side justice sector issues such as legal aid to the poor and juvenile justice. In addition, at the request of the Chairman of the Supreme Commercial Court the Bank plans to partner with it and the Ministry of Economic Development to support the drafting of framework legislation to strengthen administrative resolution of disputes and complaints handling, as well as individual bankruptcy law.
  • Supporting anti-corruption initiatives: As a coherent national-level anti-corruption program may begin to take shape, the Bank may explore avenues of possible constructive contributions to such anti-corruption initiatives.

(c) Improving the delivery of social and communal services

8. In addition to continued general cooperation with the federal government, the Bank will concentrate much of its support for improving social service delivery at the sub-national level. The Government has prioritized the social sector and social services in its medium-term program. Given that the primary responsibilities and initiatives for reform in these services will be at the sub-national level, the Bank will concentrate its focus on the regions. Main activities include the continuation of work in the areas of poverty, education, and health in cooperation with the regions. Most recent additional activities include monitoring of labor market developments (at the federal and regional levels), and technical assistance for design and monitoring of active labor market programs. Monitoring of social trends and project design for improvement of quality of social services at the local level will be continued in the Southern Federal Okrug and in other regions under fee-based services arrangements. Another critical area for improving living standards is provision of housing and communal services. The government places high importance on improving the performance of the housing and communal services (HCS) sector and on the delivery of high quality services by communal enterprises, and closely links service provision with improving the quality of life.

  • Continuation of the poverty work: In addition to continued cooperation with Rosstat and federal ministries, the emphasis of the Bank poverty work (in cooperation with DFID) has moved to the regional level. The Bank is working, and will continue to work, directly with regions on monitoring poverty and improving social assistance programs aimed at better targeting. Regional social protection strategies for Tver and some other regions will be developed with Bank assistance. Successful models of cooperation can be scaled up to similar regions.
  • Improving the health of the population: The Bank will continue its engagement with the government on adult health, and the development of a national strategy to improve the health of the population, with the goal of reversing the strongly negative trends in premature mortality and morbidity. As a follow up to earlier child welfare efforts and jointly with international donors the Bank will assist in design and implementation of practical mechanism for family support, preventive social welfare and child care at federal and regional level. Additional advocacy, public awareness and information sharing efforts jointly with government leaders, public figures, private sector and NGOs will be undertaken in support of critically needed government policies in this area. Another priority is to advise federal and regional authorities on appropriate risk pooling, insurance, and sustainable health financing. IFC will continue working with private companies on programs for occupational health, including HIV-AIDS issues. The Bank will implement on-going projects in the health sector and offer to scale up or modify existing models at the sub-national level as a service to regions. The development of public-private partnerships in the health sector could be supported jointly by TA from the Bank and direct financing by IFC to PPPs and/or purely private providers. Lessons from the TB/AIDS project could be applied through more focused interventions in interested regions through sub-national projects and TA. A few regional projects could be supported for removing environmental hotspots and addressing other environmental concerns posing major health risks to population.
  • Modernization and improvement of the education system and vocational training: The Bank will complete current projects in education designed to modernize the system and improve vocational training. As is the case of health, the Bank will seek to meet demands of regions for special support at the sub-national level for education reform. Regional TA and possible projects could focus on improving systems for professional and vocational education, accompanied by parallel assessments of local labor markets with an eye to improving the quality of local professional labor supply. Another focus could be pre-school education and early childhood education. The recently completed Youth Strategy by the Bank provides recommendations for improvements in youth policies, with possible applications to Russia for forwarding the dialogue on youth policies in the area of education and training.
  • Improvement in the provision of housing and communal services: The Bank’s support in the infrastructure sector will largely focus on improving quality of utility services and housing. The Bank has a large portfolio focused on improving heating, water, wastewater, and other municipal services in selected regions. This includes the recently completed Municipal Heating, Municipal Water and Wastewater projects and approved by the Board and awaiting for government signature the Housing and Communal Services project that aims to support reforms and investments in HCS on grant basis allocated to regions competitively. Also, a large share of sub-national lending is expected to focus on improving these services.
  • Housing finance and energy efficiency through IFC’s PEP program: IFC’s PEP program is currently focusing its work on two new product platforms in Russia: housing finance and energy efficiency, both of which are complemented by IFC investments in this area. The Primary Mortgage Development Project is working to streamline the mortgage lending process in Russia. IFC’s Sustainable Energy Efficiency Program in Russia combines IFC’s advisory and investment capacity. The project makes credit lines available to banks for on-lending for energy efficiency projects, and provides technical assistance to banks and private companies in order to raise the lending volumes available for energy-saving projects. The program has already disbursed its first credit line to Center Invest Bank in Rostov, and currently has a US$60 million pipeline of potential deals across all regions of Russia. IFC also runs a number of additional programs in Russia, including support for corporate governance in the banking sector, for improvement of forestry management practices in the Northwest, and for development of local suppliers to the mining sector in the remote region of Magadan.

(d) Enhancing Russia’s global role

9. The Bank has a strong commitment to support Russia’s increasing global role, and assist the country in fulfilling its global commitments. The Bank will continue cooperation with the Russian government in support of its emergence as an international donor and active member of multilateral organizations. In addition, the Bank will assist in establishment of mechanisms and implementation of specific actions arising from Russia’s global engagements, such as the Climate Change and Biodiversity Conventions, and pandemic diseases initiatives. During the CPS period, the Bank will also seek to share with Russian experts its analysis (and advocacy) that is currently directed towards the traditional DAC donors. Specific areas for Bank’s engagement in Russia are:

  • Assistance in the formulation of an ODA strategy for Russia as emerging donor: The Bank will continue to assist Russia as an emerging donor, and will cooperate on the design of Russia’s development aid strategy and the establishment of a national ODA system. Specific Bank support includes training/capacity events, information sharing, and advisory services. This work will be supported by Russia as a Donor Initiative DFID TF. The Bank will be implementing an “externally funded staff development program” for building Russian Government capacity for aid policy development and aid management. The Government counterparts will be involved in policy dialogue on global food crisis and climate change. Beginning with a high-level Russia-WB-OECD Emerging Donor Meeting in April 2006, the Bank is assisting Russia in organizing development aid seminars and international events. The Bank will participate in preparation and delivery of Spring 2010 international conference on Emerging donors jointly with Russia and OECD.
  • Providing access to the Bank’s instruments for channeling Russian developmental assistance: The Bank will remain engaged with Russia on international policy initiatives developed under Russia’s G-8 presidency, including on Russia’s priority themes for international assistance—quality of education, improved access to energy by the vulnerable groups, and controlling the spread of infectious diseases. The Bank will help in preparation of contributions in multilateral TFs such as Global Emergency Food Facility, the Education-For-All/Fast Track Initiatives, and ensure effective implementation of Russia supported programs like Malaria control in Africa, Global Village Energy Partnership, Quality of Basic Education (READ). The Bank will expand preparation of joint Russia-Bank aid initiatives in support of economic and human development in Central Asia, including blood banks and labor migrants support. Following increased Russia’s contributions to IDA15 the Bank will further work on strengthening ownership of IDA among Russian policy makers.
  • Fulfilling international obligations related to global goods: The Bank will assist Russia in developing procedures and mechanisms for implementing specific activities in the framework of the Climate Change and Biodiversity Conventions. TA is currently being provided on the introduction of low-carbon technologies and climate change mitigation. If the government moves ahead with the introduction of financial instruments for low-carbon technologies in Russia, the Bank would be ready to support the preparation and implementation of a number of carbon-finance projects. There are three GEF projects in the Bank’s pipeline awaiting the establishment of a legal and institutional framework for their introduction at the regional level with federal oversight. Additional projects on biodiversity and climate change could also be prepared. The Bank will continue participation in the Ministerial Conference on Forest Law Enforcement and Governance in Europe and North Asia.
  • Linking Russian companies to global markets: IFC and MIGA activities are also relevant to the expansion of Russia’s global role. In keeping with its global strategic objective to encourage investment across emerging markets (South-South investment), IFC will continue to actively support strong, reputable Russian clients in investments elsewhere in emerging markets. Consistent with its strategic objective to support South-South investments through the provision of guarantees, MIGA will continue to proactively engage Russian companies planning to invest in emerging markets.

Focus on Russian regions

10. The Bank is working with the federal government in identifying a small sub-set of 6–10 regions that may become the target of concentrated work programs with the Bank. Regions are being chosen from wealthier, middle income, and poorer areas. Important criteria for the selection of regions for Bank engagement are (i) the willingness and commitment of the regional administration to work with the Bank; (ii) a past history of successful cooperation; (iii) the reform-orientation and competence of the regional administration; (iv) strategic importance of the region for Russian development and the existence of other similar regions for possible scaling up of successful cooperation; and (v) the region’s creditworthiness and potential interest in Bank operations (for wealthier or middle income regions). Following initial engagement of selected regions, the strategic directions and modalities of cooperation with the Bank will be included in a joint Memoranda of Understanding, to be signed with the leaders of the focus regions. As noted, Bank involvement at the regional level would involve a combination of targeted AAA on diagnostics of the local economy and investment climate, and development of regional strategies, coupled with selected lending operations to address key challenges.

11. The World Bank Group will concentrate some work in poorer Russian regions, which are often in most need of development assistance. The list of priority regions will include some such poorer regions. IBRD engagement in poorer regions that lack creditworthiness will depend significantly on opportunities for participation in federal programs or the coordination of donor funds. IFC will make special efforts to support private sector activities in poorer areas. For some poorer Russian regions which have achieved creditworthiness, potential opportunities exist for fee-for-service activities or sub-national lending without sovereign guarantees. Discussions on the development of new instruments will give particular attention to facilitating Bank work in poorer areas.

ANNEX III. RUSSIAN FEDERATION—STATISTICAL ISSUES APPENDIX

(as of May 2009)

I. Assessment of Data Adequacy for Surveillance
General: Data provision has some shortcomings, but is broadly adequate for surveillance. There are weaknesses in government finance statistics, and external debt statistics and in terms of data accuracy.
National Accounts: Source data for the system of national accounts are obtained from surveys of businesses and households, and are supplemented by administrative data. Inadequate reporting by firms has constrained improvement of the national accounts. The lack of balance sheet data continues to be an obstacle to staff efforts to analyze balance sheet vulnerabilities. At the request of the authorities, a TA mission visited Moscow in November 2008 to review the framework for the compilation of national accounts statistics. It noted the Federal State Statistics Service (Rosstat) in general follows 1993 SNA, but found the imputed rental services of owner-occupied dwellings clearly undervalued. It also noted the need for methodological improvements in the calculations of volume measures of the production-based GDP estimates, including estimates of the output of financial intermediation services indirectly measured (FISIM).
Price statistics: Data are broadly adequate for surveillance, but time series analyses involving detailed CPI components are difficult to perform because of the lack of accurate time series data on CPI weights. Monthly CPI and PPI, both Laspeyres indices (2000=100), cover all regions of the Russian Federation. In addition to the general CPI index, Rosstat also publishes indices for the foodstuffs, non-food products, and services. However, the weights of the CPI components have been made available since 2006 while PPI components are not disclosed, rendering time series analysis difficult. Consumer spending data, used to calculate the CPI, are posted on Rosstat’s website annually. In 2009, the basic structure of household’s consumer expenditures, underlying the CPI calculations, has been made available on the website. Further efforts to improve the treatment of seasonal items in the core inflation index and a new household budget survey—which has been under consideration for some time—could significantly strengthen data quality.
Government finance statistics: The timeliness and quality of the data could be improved. Data on domestic and external federal debt are compiled monthly, but are made public only in summary form on a quarterly basis. In addition, there is no unified debt monitoring and reporting system. The published functional classification of expenditure differs slightly from international standards, while data on the economic classification of expenditures are available with a considerable lag. The lack of timely data on economic classification makes it difficult to assess the size of transfers to the general public, and thus to estimate the likely channels though which government expenditure affects demand components of the national accounts. In the context of a work program for statistical improvement agreed with STA, there have been ongoing improvements in the coverage and quality of government finance statistics; there remains, however, scope for improvement of expenditure data.
Monetary statistics: At the request of the authorities, a TA mission visited Moscow in April 2007 to assist in expanding the coverage of monetary and financial statistics to include other (nondepository) financial corporations and to facilitate the completion of Standardized Report Forms (SRFs). The mission recommended that the authorities reconsider the possibility of compiling data in full accordance with the SRFs framework. Since July 2008, the Bank of Russia submits to the IMF summarized data on the Central Bank Survey, the Other Depository Corporations Survey, the Depository Corporations Survey, Other Financial Corporation Survey and Financial Corporations Survey. In the context of the current global turmoil, analysis of balance sheet effects has been hindered by a lack of consistent data on the currency and maturity breakdown of banking-sector assets and liabilities.
Balance of payments: While balance of payments data are broadly adequate for surveillance as significant improvements have been made to enhance data quality, there remains scope to improve the coverage of certain components of the current, capital, and financial accounts. Improving the detail of supplemental data on the financial account would facilitate the analysis of relatively complex flows. For example, supplemental data on gross flows of long-term external debt (i.e., drawings and repayments) have been published for non-financial enterprises, but similar data for banks are not available, which have hampered staff efforts to analyze vulnerabilities resulting from external debt. Some data quality issues continue to affect the reliability of data. While the balance of payments is compiled according to an IMF-developed unified framework fully adequate for capturing economic transactions between residents and non-residents, the reliance on partial data from a variety of sources necessitates the use of estimates and adjustments to improve data coverage. In particular, the CBR makes adjustments to merchandise import data published by the State Customs Service to account for “shuttle trade,” smuggling, and undervaluation. At the same time, Russian compilers are seeking to reconcile their data with those of partner countries. Some improvements have been made in the coverage and quality of surveys on direct investment, and the CBR has informed the Fund of its intention to participate in the Coordinated Direct Investment Survey. Headline data on reserves are reported to the Fund and the markets on a weekly basis with a four-business day lag. The Fund receives additional detail on reserves and reserve liabilities through the central bank balance sheet, but this information is not as comprehensive as the Reserve Template, which is disseminated with a lag of twenty days.
II. Data Standards and Quality
Participant in the Special Data Dissemination Standard (SDDS) since January 31, 2005.A data ROSC prepared in October 2003 was published on the IMF website on May 14, 2004.
III. Reporting to STA (Optional)
Data are being reported for publication in the International Financial Statistics (IFS), Government Finance Statistics Yearbook, the Direction of Trade Statistics, and the Balance of Payments Statistics Yearbook.
Russian Federation: Table of Common Indicators Required for Surveillance(As of May 31, 2009)
Date of latest observationDate receivedFrequency of data6Frequency of reporting6Frequency of publication6Memo Items:
Data Quality–Methodological soundness7Data Quality Accuracy and reliability8
Exchange Rates5/12/20095/12/2009DDD
International Reserve Assets and Reserve Liabilities of the Monetary Authorities15/1/095/8/09WWW
Reserve/Base Money (narrow definition)5/4/095/8/09DWWO, LO, LO, LOO, O, O, O, O
Reserve/Base Money (broad definition)5/4/095/8/09DMM
Broad MoneyMarch 20094/28/09MMM
Central Bank Balance SheetApril 20095/4/09MMM
Consolidated Balance Sheet of the Banking SystemMarch 20095/5/09MMM
Interest Rates25/12/095/12/09D/W/MD/W/MD/W/M
Consumer Price IndexApril. 20095/5/2009MMMLO, LO, LO, LOO, O, O, O, NA
Revenue, Expenditure, Balance and Composition of Financing3–General Government4April, 20095/12/2009MMMLNO, LO, LO, OO, O, O, O, O
Revenue, Expenditure, Balance and Composition of Financing3–Central GovernmentApril, 20095/12/2009MMM
Stocks of Central Government and Central Government-Guaranteed Debt5Q1 2009Apr. 2009QQQ
External Current Account BalanceQ1 20094/3/2009QQQO, O, LO, OO, O, O, O, O
Exports and Imports of Goods and ServicesQ1 20094/3/2009QQQ
GDP/GNPQ4 20084/2/2009QQQO, O, LNO, OLO, LO, O, O, O
Gross External DebtQ1 20094/7/2009QQNA
International Investment Position20087/1/2009AAA

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Irregular (I); Not Available (NA).

Reflects the assessment provided in the data ROSC published on May 2004 and based on the findings of the mission that took place during October 8–23, 2003 for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning (respectively) concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).

Same as footnote 7, except referring to international standards concerning (respectively) source data, statistical techniques, assessment and validation of source data, assessment and valid.

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Irregular (I); Not Available (NA).

Reflects the assessment provided in the data ROSC published on May 2004 and based on the findings of the mission that took place during October 8–23, 2003 for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning (respectively) concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).

Same as footnote 7, except referring to international standards concerning (respectively) source data, statistical techniques, assessment and validation of source data, assessment and valid.

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