MOSCOW, October 26 (RIA Novosti) - The Russian government has offered an additional 1 billion rubles ($40 million) to subsidize borrowing rates for purchases of agricultural produce, a deputy prime minister said Friday.
The measure is the government's latest step to curb rising food prices, the main driver of inflation this year, ahead of parliamentary and presidential elections. Prices for some food products have recently increased by 40% due to global and domestic market trends. Inflation is expected to be 9.5%-10% this year against 9% last year.
Alexei Kudrin, also finance minister, told members of the upper house that a relevant bill on changes to the 2007 budget would be submitted to parliament's lower house later Friday.
He said the government was urgently subsidizing loans to try and lower interest payments paid by food processing companies and limit price rises. The deputy premier also said 5.7 billion rubles ($223 million) would be injected into the authorized capital of Rosselkhozbank, the Russian agricultural bank, to support farmers.
Another method of slowing food price growth will be grain interventions, which Kudrin said would begin October 29. "On October 29, we will start interventions on the grain market, the Agriculture Ministry is responsible for that," he said.
On other markets, import duties will be cut by 10%. "This will ease access to the domestic market for Western producers," Kudrin said, adding that the government remained committed to reducing inflation by monetary instruments.
Kudrin said higher incomes in Russia were leading to increased purchasing capacity and higher demand for food products. "Consumers have high levels of disposable income, which is boosting demand," he said, adding that food prices are growing on this trend.
The deputy premier said food prices were also up in the European Union, and inflation in the EU is expected to top 2.4% this year against 2% last year.
Energy tariffs
Kudrin moved to allay concerns over the effect on energy prices next year. "From January 1 next year, growth in energy tariffs will not exceed the general prices index, or inflation," he said.
The deputy premier said the peak in price growth in this sector would fall in 2009-11 but would be largely compensated by more efficient fuel saving schemes or by transition to energy-saving technologies.
"I can cite the example of Ukraine where energy prices have increased, but at the same time fuel and energy efficiency has led to savings of 50-100%," he said.
Kudrin said transition to energy saving technologies in Russia would be covered by either the market, meaning consumers, or partially by the government.
"We have been working on an energy efficiency program for some time and we should probably devote more attention to it," he said.
