Russia will emerge stronger from financial crisis: Putin
21 Nov 2008
Russian prime minister Vladimir Putin has vowed to protect Russia from an economic collapse by not repeating the mistakes made during its 1998 ruble devaluation that led to default in debt repayment and laid the current global financial turmoil firmly at the doorstep of its cold war rival, the US.
Addressing the annual congress of the governing United Russia Party in Moscow, Putin said Russia will do everything it takes to prevent another financial collapse. He said the country would emerge stronger from the global crisis started by the reckless and unregulated markets of the US.
"Cheap money doping and mortgage troubles in the US have caused a real chain reaction, paralysed the global financial system and brought global distrust to the market," media reports quoted Putin as saying.
Putin said Russia, like many other developed countries, is facing difficult conditions and that the people may have genuine doubts about the direction the economy is moving.
He said his government and Russian regulators will do their best to prevent a recurrence of the past meltdown - protect deposits of our citizens and to secure the legal interests of those who invested their own money in housing construction, the prime minister said.
Putin also said the government is setting up a $20 billion contingency fund to boost the deal with a crisis situation over the longer term $20 billion package to boost the economy, which has seen investors pulling out billions of dollar from the Russian market leading to umpteen number of closures of the Russian stock exchanges as stock prices crashed by nearly 70 per cent since May as also with the rapid decline of global oil prices thereby putting a brake on one of the fast growing economies, pushed mainly through the eight year reign of Putin when he was the pesident.
Although Russia foreign currency reserves have fallen by nearly $123 billion since early August, it still has one of the largest foreign currency reserves, standing at $453.5 billion as of last week, thanks largely to the high price of oil in the past, Putin said these reserves would contain any increase in inflation as also ease the slide of the rouble.
He said the country will not be hampered by the slide in oil prices and Russia will maintain its reserves and try to maintain budget stability although he indicated that the budget will probably slip into the red next year with a deficit of approx 1 per cent of the gross domestic product.
The Russian central bank has pumped in nearly $57 billion in the last two months to prop up the ruble, which has dropped to its lowest level since April 2006.
Putin said that United Russia Party, which currently holds power in Russia and has a majority in the Duma, would be tested on its ability to deal with the financial crisis.
Blaming the US government for not regulating its financial market, Putin said Russian companies should now look at ways to finance its debt from domestic sources.
His $20 billion economic package will give tax breaks for companies, more powers will be given to local government to reduce taxes further thereby protecting ordinary citizens from the effect of economic slowdown.
The foreign currency reserve will be partly used for payment of salaries of civil servants, pension payments, and social benefits and social support system will continue as before and 98.5 per cent of all savings of depositors in Russian banks will be guaranteed by the government.
Unemployment benefit would go up by $54.66 from January 2009 as many people have been laid off since the beginning of the crisis.
Thanks to the Georgian crisis which has nearly restarted the cold war with the US, Putin said his government will spend an additional 50 billion roubles in 2008-09 in the defense sector and added that the financial crisis should not bankrupt the defense industry.
He said that Russia will take a cue from Japan and give $1 billion to the International Monetary Fund to help countries affected by the financial crisis and also give loans to India and China for buying Russian equipment.
