Russian Federation: 2009 Article IV Consultation—Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2009 Article IV consultation with the Russian Federation, the following documents have been released and are included in this package:
The staff report for the 2009 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on June 1, 2009, with the officials of the Russian Federation on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on July 13, 2009. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A staff statement of July 27, 2009, updating information on recent developments.
A Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its July 27, 2009 discussion of the staff report that concluded the Article IV consultation.
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
Prepared by Staff Representatives for the 2009 Article IV Consultation with the Russian Federation
Approved by Marek Belka and Aasim Husain
July 13, 2009
Discussions for the 2009 Article IV consultation were held in Moscow during May 21–June 1. The mission comprised Mr. Thomsen (head), Messrs. Takizawa and Tiffin, Ms. Zakharova (all EUR); Mr. Goldsworthy (FAD), Mr. Kisinbay, Mr. Tuya (both MCM), Ms. Kozack (RES), and Mr. Brekk (resident representative). Mr. Mozhin, Executive Director, also participated in the discussions. The mission met with First Deputy Prime Minister Shuvalov, Deputy Prime Minister and Minister of Finance Kudrin, Central Bank of Russia (CBR) Governor Ignatiev, other senior officials, and representatives of financial institutions, corporations, and think tanks.
Summary. Russia has been hit hard by the dual shocks of declining oil prices and capital flow reversals. The banking system is under strain from rising overdue loans, and credit to the private sector is contracting. Despite a substantial fiscal response, economic activity is projected to decline sharply in 2009 and to recover only tepidly in 2010. Against this background, staff made the following recommendations:
On financial sector policies, staff called for a proactive and comprehensive plan—guided by systemic stress tests—to restore the health of the banking system and reinvigorate credit growth. It also underscored the need to develop contingency plans to bolster the authorities’ ability to proactively address potential future problems in the banking system.
On monetary policy, staff agreed that there was scope to lower interest rates, but suggested that the authorities proceed cautiously in doing so. Over the medium term, monetary policy should be refocused on inflation control, in the context of a flexible exchange rate policy.
On fiscal policy, staff questioned the reversibility and effectiveness of the planned relaxation. It noted that a smaller and better targeted stimulus could have a similar impact on growth, given the larger fiscal multipliers, but would avoid a permanent change in the budget structure. A smaller non-oil deficit in 2009 would also create room to maintain the fiscal stimulus next year, if needed. With this in mind, staff advised the authorities to scale back the stimulus in 2009 and improve its targeting.
Exchange rate regime. Russia’s exchange rate regime has been reclassified from “stabilized arrangement” to “other managed arrangement” effective November 1, 2008 to reflect the managed depreciation of the ruble, and higher day-to-day exchange-rate fluctuations. 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. The exchange system is free of restrictions on payments and transfers for current international transactions.
It is proposed that the next Article IV consultation be held on the standard 12-month cycle.
I. From Overheating to Crisis
A. Deteriorating Macroeconomic Situation
B. Policy Response to the Crisis
II. Near Term Outlook and Risks
III. Policy Discussions
A. Financial Sector Policies
B. Fiscal Policy
C. Monetary Policy
D. Structural Reforms
IV. Staff Appraisal
1. Credit Indicators, 2006-09
2. Oil Prices and External Stability, 2001-10
3. Monetary Indicators, 2005-09
4. Monetary Policy Indicators, 2002-08
5. Public Debt Sustainability: Bound Tests
1. Selected Macroeconomic Indicators, 2006–10
2. Balance of Payments, 2006–10
3. Fiscal Operations, 2006–10
4. Financial Soundness Indicators, 2003–09
5. Monetary Accounts, 2006–10
6. Macroeconomic Framework, 2006–14
7. Indicators of External Vulnerabilities, 2004–08