From Nezavisimaya gazeta, May 25, 2026, p. 1. Complete text:
. . . A policy of managed cooling has pushed our economy into a multiyear investment slump amid negative economic growth in 2026. The government is still trying to retain investment incentives and abatements, but the Central Bank leadership is directly tying the strictness of its monetary policy to the government’s actions.
Such a standoff does not portend a speedy recovery for the Russian economy, especially given constantly rising taxes and increasing fiscal scrutiny.
The “cold war” between the Russian Central Bank’s leadership and [Russian] fiscal policy speaks to a direct link between the level of credit tightening and the government’s actions. “We are waiting for the finalized budget figures for the current year. For us, the general logic remains unchanged: The greater the budgetary stimulus, the less growth there should be in the other component of monetary supply – lending – which means that, all else being equal, the key interest rate needs to be higher,” Central Bank chair Elvira Nabiullina announced after the latest decision to symbolically lower said rate. Immediately after her remarks, the Russian Finance Ministry announced that there would not be a public vote on finalized budget figures for the current year. The Russian government will not amend the budget laws for 2026 and the 2027-2028 planning period at all, instead finalizing its figures as part of the government’s powers, said Finance Minister Anton Siluanov. “If the parliament allows us to adjust the parameters of the current budget, then the government will work with parliament to internally determine the priorities for expenditures,” Siluanov explained.
For now, actions by the Central Bank and the government taken under the established policy of cooling the economy have led to lamentable consequences: a drop in investments in 2025 and 2026, as well as a contraction in gross domestic product, at least in the first quarter of this year.
“Tight monetary policy, which cannot directly affect supply, suppresses demand through high interest rates. Under such conditions, further supply shocks and continued rigidity in monetary policy could lead to an unacceptable decline in output and budget revenues and a systemic economic crisis,” warns a new report by the Russian Academy of Sciences’ Institute of Economic Forecasting about the “interaction” between our officials’ monetary and fiscal policies.
“In reaction to rising prices, monetary policy raises interest rates, increases the budgetary cost of reforms and decreases private-sector investment. Thus, the tools of macroeconomic policy act in opposition to each other,” the economists concluded in their 400-page study.
In the present circumstances, the central problem is not at all a choice between a high or low key interest rate. “What we need is to construct a framework in which the budget, macroprudential measures, sector-specific measures and monetary policy work in coordination rather than in opposition to each other. This is in line with the Russian president’s directives to restore economic growth rates and investment activity and to resolve structural problems in economic sectors, taking into account the need to keep inflation in check,” the economists wrote.
According to the report, the most important thing is that the goal of ensuring stable and rapid economic growth needs to be reinstated as a key economic policy priority. It is notable that few Russian officials are referring to the current contractions as “economic stability.” Indeed, can falling GDP and prolonged reduction in investment really be considered signs of macroeconomic stability?
In essence, the alternative to stable growth of the Russian economy is an inevitable budgetary crisis due to a shortfall of tax revenue amid reduced economic activity, all while the Finance Ministry spurs further contraction of the economy and drives taxpayers into the shadows by increasing the tax burden.
What is decisive right now is not just the scale of measures to support the economy but their purpose and composition: The analysts advise that resources be directed at increasing supply, reducing inflationary constraints and supporting strategic development goals. According to them, Russia needs a formalized coordination framework for the actions of the Central Bank and the government “with predetermined triggers, implementation conditions and outcome criteria.”
The economists’ suggestions to initiate close coordination of the work done by the government and Central Bank in order to avoid a systemic crisis in the country sound reasonable. But from the point of view of institutional interests, they would be suicidal for Central Bank officials. That’s because they would effectively have to admit the destructive nature of the policy that the Central Bank has been implementing in recent years. And it remains unclear which option Central Bank officials will choose: push the country into a crisis for good or admit their mistakes.