MOSCOW, Nov 16: Russia's economy threatens to overheat and monetary policymakers should shift their focus from producing dramatic growth figures to implementing anti-inflation measures
, IMF director general Rodrigo Rato said Tuesday on arrival to Moscow.
His comments clashed with the main economic policy objectives of President Vladimir Putin's administration - to double Russia's gross domestic product by 2010.
Rato arrived on what International Monetary Fund officials said would be a three-day "listening and learning tour," his first to Moscow, switching the focus from meting out financial aid to offering guidance on how to keep Russia's six-year economic boom going.
He told the Kommersant business daily that Moscow's best strategy now would be to make early payments on its external debt - benefiting from a boom on global prices on oil and gas - and making investments into long-term growth projects.
"I think there should be two main focuses for development of the Russian economy - introducing anti-inflationary measures and structural reforms that would help develop the energy sector," he said.
Rato said pouring in the extra petro-dollar proceeds into the immediate economy would add to inflationary fears and the best strategy was to make long-term growth investments and broader structural reforms.
These would include shoving the door wider open to foreign investments and finally switching to global accounting standards - thus making businesses and government projects less murky, a common Russian plague.
Russia's extra proceeds should not be invested in short-term projects because these would only lead to inflationary pressures and should instead be stowed away in a stabilization fund, as Moscow has been doing.
"But if the government does decide to use the funds ... the best thing would be to make the investments into projects that would help long-term growth.
"The best strategy is to reduce debts," including those to the IMF, he said.
Rato was also non-committal about President Vladimir Putin's demand from his government to double the nation's gross domestic product by the end of the decade - an order that even his aides suggest was suicidal since it would feed inflation.
"We think that this is an ambitious goal, but not unachievable," Rato said.
"This would demand annual growth of about seven or eight per cent, and this in turn demand growth in the energy sector," he said, again stressing the need for energy sector reform.
"This all would demand for the Russian economy to become more open, not only the energy sector but other segments of the economy as well."
Russia's economy survived off assistance from the IMF throughout the 1990s, borrowing $22 billion between 1992, its first year of post-Soviet existence when the economy was in shambles, and 1999 - the same year Putin was named prime minister.
Russia was forced to devalue its currency during the summer 1998 economic collpase. With the resulting cheap ruble helping exports and local producers, and timely growth in global prices on Russia's oil and gas, the economy has grown steadily since 1999.
The Russian finance ministry reports that Russia's IMF debt stood at just $5.1 billion as of January 2004.-AFP
