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Russia must drop loan subsidies given lower inflation - minister

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Subsidizing bank loans must be abandoned given the target of 5% inflation by 2012, Russia's finance minister said Monday.
VOLGOGRAD, February 19 (RIA Novosti) - Subsidizing bank loans must be abandoned given the target of 5% inflation by 2012, Russia's finance minister said Monday.

"I foresee a time when inflation will be lower than 5%, and we have set that as a target by 2012," Alexei Kudrin said.

The minister said that now that inflation is declining subsidizing bank loans keeps loan rates high, as banks have to fix higher rates to obtain subsidies.

Kudrin said that dropping subsidies could help lower loan rates.

He said loans had grown 50% to 15 trillion rubles (over $560 billion) in 2006 year-on-year, and that declining inflation and the appreciation of the ruble will ensure better availability of loans for enterprises.

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