The Prime Minister took questions posed by Rossiya 24 TV Channel correspondent Maria Kudryavtseva.
Excerpts from the transcript:
Maria Kudryavtseva: Good afternoon, Mr Mishustin.
Mikhail Mishustin: Good afternoon.
Maria Kudryavtseva: What is the role of the Finance Ministry in creating a stable financial system and supporting the economy?
Mikhail Mishustin: The Finance Ministry undoubtedly plays the most important role in that.
I am pleased that we are having this conversation ahead of a major holiday. The forerunner of the Finance Ministry was created 220 years ago under Tsar Alexander I. It was called the Finance Ministry and consisted of three important services, which were called collegiums back then. The revenue collegium - it was called the chamber collegium - was in charge of revenue. Accordingly, it was the forerunner of the taxation service. The second collegium was called the state office collegium and was responsible for expenditure. The third service was called revision collegium - these are the functions of audit department, which are now distributed among a number of the Finance Ministry’s subordinate services. Since then, the Finance Ministry has been functioning as we know it today.
The main functions of the Finance Ministry include, primarily, the provision of all basic functions of the state. Fulfilling the national development goals that the President has set before us and the people are expecting from us is, of course, the most important aim which is, first and foremost, related to social obligations that include the payment of pensions, benefits and wages, as well as a wide variety of different areas related to the construction of kindergartens and schools, as well as housing and utilities. Prioritising expenses and the revenue account are among the Finance Ministry’s functions.
What else is important? That the Finance Ministry presents budget estimates. The budget is a vital, fundamental document for the nation, which includes all sources of income and calculations involving revenue and, respectively, expenditures. You know, debates over how best to spend the money never end. They talk about the percent of GDP that should be spent on this or that sector. Of course, I already said that social spending is the most important issue. You know what the President thinks about fulfilling social commitments. It is a national priority.
Next, spending on healthcare, medicine, education and many other things, like the development of the industry. How can we do this correctly? We compile a three-year budget. Why a three-year period? This is related to investment cycles and budgeting cycles. In general, it is impossible to do anything really important, create a product or an item very quickly. You can’t build a house in a year; it usually takes longer.
A three-year plan – we used to have five-year plans in the Soviet Union – is a very important document, which must be coordinated with all departments, federal authorities and public associations, and after that we discuss it. It is scrutinised by the Accounts Chamber and, of course, by the Federal Assembly, that is, by the State Duma and the Federation Council. All departments of the Presidential Executive Office analyse it. As you know, after that it is approved and submitted to the President for signing. So, this complex and systemic process is the responsibility of the Finance Ministry.
I should also mention the services and agencies that comprise the Finance Ministry; this is important. Apart from the Finance Ministry itself as a legal entity, there are major and sizable services such as the Federal Taxation Service, the Federal Customs Service, the Federal Agency for State Property Management (Rosimushchestvo), the Federal Treasury and the Federal Service for Alcohol Market Regulation. I can tell you how many civil servants in Russia are working at the Finance Ministry and its agencies and services: over 60 percent or more, about 64 percent to be more precise.
When we talk about the Finance Ministry, we must certainly mention its personnel. Personally, I worked at the Finance Ministry for many years. But first of all, I would like to congratulate Anton Siluanov, who is a professional with a capital P. There is only one entry in his work record: Finance Ministry, where he started working after service in the army. Mr Siluanov was involved in the most important decisions, including the establishment of the Stabilisation Fund, which was later renamed the National Wealth Fund, the expansion of the Finance Ministry, the digital platforms and the budgetary rule. These are the elements of financial stability that allowed our country to develop sustainably and to provide the necessary resources to the federal executive authorities and the people. Anton Siluanov and my colleagues that work there, deserve our most heartfelt thanks. They don’t always grant our requests, yet I believe that today we should congratulate them on their day and wish them all the very best.
Maria Kudryavtseva: Which Finance Ministry decisions had a direct effect on stability?
Mikhail Mishustin: There have been many, but I think pride of place should be given to the adoption of the Tax Code, the first and second parts, in the early 2000s. It was very important. Before 2000, we had about 53 taxes and duties. After that, the figure was cut to 13 or 14. Optimisation and the reduction of the tax burden were landmark decisions, the effects of which all companies and people working in Russia felt.
Of course, there is also the Stabilisation Fund, which was later changed to the National Wealth Fund. This was a major achievement that helped us create a safety cushion and reliably plan, along with the Bank of Russia that implements our monetary policy and does so independently, the financing of all functions of the state.
Next, the creation of the electronic budget and technological management platforms, like the Taxation Service and the Treasury have, and the single treasury account and customs management, which is being developed at the Finance Ministry. Thanks to these landmark decisions, people can maintain financial stability even despite the unprecedented sanctions being imposed against our country. This is how things really stand. Of course, all this, together with a system of regulations and decisions adopted at the Finance Ministry, is being done for the benefit of the people and is a responsible state policy.
Maria Kudryavtseva: Mr Mishustin, which decisions of our fiscal authorities – the Finance Ministry and the Central Bank – helped us overcome the 2014 sanctions and are still effective now?
Mikhail Mishustin: There can be different responses to sanctions. There are short-term responses, where you analyse the risks and threats such sanctions can pose to agencies, people, federal executive authorities and companies, after which you adopt short-term decisions and then plan long-term decisions. There is also a responsible monetary policy, which the Central Bank implements independently but in coordination later with the Government. This implies subsidising credit rates, low-rate loans, and many other programmes.
As for sanctions, including those imposed in 2014, which you mentioned, if we compare them to the 2022 sanctions, we see that the number of them is larger than the sum total of sanctions adopted against all other countries in the world. The number of sanctions that have been adopted against Russia in such a short period… it would take days to read them, because there are so many details.
But the important thing is that the systematic work and, if I may say so, the hardening of our Government and our state, which is responding to these sanctions professionally, allow us to avoid the negative scenarios our ill-wishers hoped to see realised.
Regarding the scenarios expressed by the leading global analytical and financial agencies in March, I would like to remind you that they expected at least a 25 percent contraction in our GDP, at least a 30 percent growth in inflation, the collapse of the rouble and the death of our industrial capacity. Do you remember this?
Maria Kudryavtseva: 200 roubles to the dollar.
Mikhail Mishustin: That did not happen. The rouble grew stronger and the predicted decline in the GDP was minimal. Now, in August and early September, it’s about 0.5 percent. Inflation is at 13 to 14 percent and has definitely not reached 30 percent.
Why am I saying all this? Because our responsible financial policy and the huge number of decisions we made, first of all, in coordination with the Bank of Russia and also under the President’s guidance, allowed us to mitigate all these effects and plan essential long-term decisions to support the economy and our people.
The pandemic experience also taught us many lessons. The pandemic revealed completely new threats to our people and the economy. Nobody predicted that we would practically suspend all air service; that we would not be able to move about freely, that restaurants would be closed and that a huge number of other problems would come up.
However, in responding to these challenges, in cooperation with the Finance Ministry that pursued a very responsible policy, we dealt with this situation in 2020, and better than most other countries. Speaking about the GDP, our economy dropped by a mere 2.9 percent, but it grew by 4.7 percent the following year. This is also a kind of exercise. I am referring to the impact of such risks on the economy and the ability to pursue a responsible policy in response.
I can assure you that now the mechanisms that were developed by the state, the Government, the Finance Ministry and the Bank of Russia under the President’s guidance, give us confidence that we will move towards our national development goals and will certainly reach them.
Maria Kudryavtseva: Mr Mishustin, you said you discussed responses to the sanctions that were adopted for a longer term. What do you think about the potential decisions and actions of the Ministry of Finance and the other financial authorities for the next 10 to 12 years?
Mikhail Mishustin: To begin with, this is a responsible budget financial policy. What does “responsible” mean in this context? We must have a stable financial system. All the components of the financial system must be stable. People should not have to worry about their savings, and all components of the financial system must be failsafe and reliable.
Second, I think this is competition between financial agencies and financial institutions. I am referring to insurance companies, banks and stock exchanges. Competition is a must because all of these have equal access to the market, and the opportunity to render services in a competitive environment will produce fair prices.
Third, this is an opportunity to resolve our problems without the involvement of third countries. This is the case as trade is developing de facto in national currencies, without the dollar or euro due to their inability to function properly, and as digital platforms evolve correctly. At this point, I can cite such technological solutions as the Bank of Russia’s fast payment system, the Mir card, the National Payment Card System (NSPK) and the quick financial message system. All of these are elements of a digital platform.
I can also mention here the tax management system that makes it possible to service companies and individuals extraterritorially – almost 90 percent electronically, when you receive all the necessary documents that are generated automatically. Other platform solutions – the Federal Treasury and customs administration – are all components that ensure, let me say it once again, financial stability and must operate without the involvement of third persons or third countries.
Also, it is important to expedite the digitisation of all components in financial technology with Fintech. In this sense, digitisation means the creation of digital platforms that are easy to work with and are not burdensome for either individuals or businesses. This is a very important element.
Finally, this is security. Security concerns everyone. It is the security of personal savings, the reliability of all savings and all technological solutions, as well as cybersecurity, which is absolutely indispensable in the 21st century.
Maria Kudryavtseva: Replying to your question, Finance Minister Anton Siluanov said the new budget you will be discussing is one of the most difficult in his professional career. Why is that?
Mikhail Mishustin: It will be difficult to develop our budget because of the magnitude of the sanctions imposed on the Russian Federation, and attempts by unfriendly countries to block our work, exports and imports, logistics corridors and our opportunities for financing various activities. The budget will not be simple but, believe me, we will discuss it professionally and will definitely find the necessary solutions for implementing the state’s main goals. I would like to say that we will certainly cope with all these challenges and will emerge from the crisis stronger and more professional. Everything will work out for us.
Maria Kudryavtseva: Mr Mishustin, thank you very much for finding the time for this interview and for very interesting answers.
Mikhail Mishustin: Thank you.