Such a super agency will effectively control all sectors of the economy
The recent report of the Chairman of the Central Bank of Russia Elvira Nabiullina in the State Duma clearly demonstrated: the Bank of Russia is an effective and reliable regulatory instrument, the successes of which are obvious. But the leadership of the Central Bank perceives the mandate of its responsibility for the economy in our country in an extremely narrow and limited manner. But, as they say, there is a way out.
The management of the Bank of Russia really has something to praise for. Ruble — relatively stable, inflation in general — unambiguous (in the sense of not two-digit) and is under control. The banking system is developing, household deposits are insured, payments from legal entities are stable even taking into account illegal Western sanctions. We can confidently say that the Central Bank is probably coping well with its numerous and diverse tasks. But this is, so to speak, on the one hand. On the other hand, everything looks completely different.
Criticism of the leadership of the Central Bank is concentrated mainly around three fundamental things. First: these are “stuck” gold and foreign exchange reserves abroad (about $300 billion), which were blocked by unfriendly countries. It is clear that the leadership of the Central Bank of the Russian Federation could not have known about the plans to start the SVO, but the tendency towards confrontation between the West and our country was nevertheless visible. The national payment system that manages Mir cards and SBP, after the Crimean spring, started working on time and very successfully. Why, say, in 2014 did not at least a gradual conversion of potentially toxic gold and foreign exchange reserves begin into other, more liquid forms?
The second subject of criticism of the Bank of Russia — this is, of course, the level of the policy rate, which now stands at a significant 16% (and compares with the last decade's record in 2022 of 20%). 16% with single-digit inflation is not just prohibitive, but essentially prohibitive.
The third aspect that I don’t like about the activities of the leadership of the Central Bank, — this is that no matter what happens in our country, banks make money one way or another and are in the black. In recent years, the banking business has probably become the most marginal activity in our country in the presence of dynamically developing “construction”, fuel and energy complex, agriculture and mechanical engineering. At the end of last year, banks received a record profit of 3.3 trillion rubles, which is impressive even in our country with a still distorted economic structure. In fact, the Bank of Russia, as an industry leader, has performed a solid “A” here, but this does not make it any easier for other industries.
Well, the most important thing that critics and opponents present to Ms. Nabiullina is that the Bank of Russia does not consider itself responsible for ensuring economic growth in the country. It’s as if, on the one hand, the Central Bank “works in close contact with the government,” and on the other hand — is an independent state organization, in fact not subordinate to anyone. To complete the picture, it is worth adding that the Bank of Russia still receives profit annually from one or another commercial activity. At the end of 2023, the net profit of the Central Bank of the Russian Federation amounted to 140.4 billion rubles. This result can also certainly be attributed to the successes of the Central Bank, but society, in my opinion, expects from the main financial regulator in the country not only private commercial successes, but first of all — development of the economy as a whole.
Someone will probably say that the Central Bank cannot bear all the responsibility for the development of the most complex national economic system. But, on the other hand, why shouldn’t the Bank of Russia take on increased powers?
There are reasons and opportunities for this. The Central Bank of Russia has complete information about all economic (and not only financial) relations in our country. There is no transaction in Russian nature that the national financial regulator would not notice. Here we have a potentially high level of controllability in economic relations. In addition, the Bank of Russia works with the Russian ruble — the material basis of our entire economic system. If money — This is the circulatory system of the economy, then why shouldn’t the Central Bank be its heart?
The essence of my proposal is to vest the Bank of Russia with emergency economic powers, which will allow it to expand its mandate to form a full-fledged body of state planning and regulation — Gosplan 2.0.
At a recent report of the Government of the Russian Federation, Chairman of the Russian Cabinet of Ministers Mikhail Mishustin was asked a question about the prospects for the implementation of Gosplan 2.0, and the Prime Minister agreed with the posing of such a question, emphasizing that modern state planning should be based on a “digital Gosplan”, with which We, state economists, agree, as they say, with both hands.
The key task of Gosplan 2.0, coupled with the current powers of the Central Bank, should be precisely ensuring rapid economic growth in our country. What does “advanced” mean? in our conditions? During the report of the Chairman of the Central Bank of the Russian Federation Elvira Nabiullina in the State Duma at a plenary session, I asked the question about what level of annual economic growth, taking into account the extremely ambitious instructions of the President, does the Central Bank of Russia consider optimal and what does it intend to do to ensure it?
Elvira Sakhipzadovna answered quite specifically. Taking into account the current level of development of the productive forces and staffing of the economy, we can count on economic growth at or slightly above 2%. According to the Chairman of the Central Bank of the Russian Federation, if we want more ambitious growth, then it is necessary to increase investments in expanding production, training and increasing labor productivity, including robotization. One could agree with this answer, but here we inevitably recall the prohibitive level of the key rate in the country of 16%. In fact, now economic growth in our country often occurs in spite of and in parallel with the policies of the Central Bank.
…2% annual economic growth, of course, does not suit us. We are also not satisfied with the level of about 3.6%, which was demonstrated by our economy in 2023. Despite the success of this level, it cannot be considered a “breakthrough” level. for the simple reason that this scale is, in fact, comparable to the overall level of growth of the world economy as a whole. Accordingly, in order to remain among the top five leading economies in the world and claim fourth place in terms of GDP PPP, we need to grow at the level of 5%. And in order to maintain and increase our positions in the long term, growth should be at the level of 7–10%, which, by the way, is not fantasy and is demonstrated by some of our BRICS partners, for example India (growth based on the results of 2023 — 7 .3%).
All this is quite realistic in our Russian conditions, which requires a combination of the efficiency of the Bank of Russia with the approaches and principles of the digital State Planning Committee 2.0. I will outline only some of the fundamental tasks that this mega-regulator is designed to solve if it is formed in Russia.
First, increasing the money supply. I repeat, without money there is no economy. Currently in Russia, the M2 aggregator (all money in the economy in any form) accounts for about 60% of GDP. What does this mean in simple terms? In essence, this means that almost half of our GDP is not reflected in monetary form, that is, property, goods, services, benefits and values have been produced and exist, but for some reason they are not fully provided with money. In fact, this is anemia in the body, which, as is known, leads to bad consequences. For example, in China the M2 aggregator is about 1.5 of GDP, other countries of the global majority are also trying to saturate the economy with the necessary money supply. And here there is a huge number of opportunities, ranging from government lending and issuing government bonds to the targeted issue of “colored” bonds. money directly allocated to modernize the economy and develop infrastructure in the country. The digital ruble (the third form of money), for the introduction of which we have already praised the Central Bank of the Russian Federation, is also an excellent tool for increasing the volume of money supply in the country.
Why is this extremely important now? This is because the economy needs investment resources, and currently, against the background of an inflated key rate and the insufficient level of the M2 aggregator, the price of investment resources is becoming virtually unaffordable for most sectors and complexes of the national economy.
The second task of the super agency — This is to ensure structural modernization of the economy. It is clear that the share of knowledge-intensive industries in GDP should increase, and the percentage of raw materials exports — shrink. But this can only be achieved by combining financial and economic policy with the implementation of long-term plans for socio-economic development. Digital Gosplan 2.0, based on the instructions of the president (primarily — May decrees), is designed to determine the level of required production in the main sectors of the national economy.
The third task of the “united State Planning Committee” is: — this is the integration of financial, industrial and scientific and technological potential. We must remember the priority of government and social tasks over commercial or industry-specific ones. The marginality of the banking sector, which we discussed above, often occurs against the backdrop of underfunding of production, science and innovation. The synergy of tasks of various industries and complexes and their coordination at the level of the country's strategic development will create conditions for balanced development.
In conclusion, I would like to ask: how feasible is this approach? In my expert opinion, there is nothing out of the ordinary here. The importance of the state in the economy is growing, the principles of strategic planning are being implemented, the discourse around intersectoral balances and the digital State Planning Commission is already a reality. It seems to me that these factors can become the basis for a new, relevant economic policy in our country, if its implementation is part of the responsibility of a more ambitious Bank of Russia, which, becoming a super agency in the country, will help achieve strategic goals throughout their entire contour. These innovations can be implemented right now, during the period of determining the structure and composition of the new government and on the eve of the adoption by the President of Russia of a new pact of May decrees for the upcoming “six-year plan”. Well, who can head this mega-regulator — this, as they say, is the second question, although no less important…