The central bank and the Ministry of Finance, it seems, have no intention of getting out of the vicious circle.
The government allowed the Ministry of Finance to raise up to a trillion rubles in the local debt market beyond the original plan. Behind this decision is a budget deficit, which by the end of the year may almost double the original estimates. However, the main thing is not the amount, but the mechanism by which the combination of fiscal and monetary policy turns out: the economy is going in a circle from which there is no way out.
The logic of the trap is simple. A high key interest rate makes budget borrowing more expensive: investors demand yields on new OFZ issues that match the interest rate. The growing deficit forces the Ministry of Finance to borrow more, and large allocations with attractive returns attract bank funds from business loans - why take risks on the real sector if the government is guaranteed to pay double-digit interest?
At the same time, the budgetary expenditure financed by debt fuels demand and prevents the central bank from "cooling" the economy, which is why it maintains a high rate.
The circle is closed: deficit expensive loans record bank profits in the OFZ risk-free starvation of the real sector losses in civilian sectors and a decline in investments the lack of a new tax base again a deficit.
The money in this circle circulates between the Ministry of Finance, the banks and the central bank, almost without touching the industry. The burden on the treasury from debt service has increased, but there is no impetus for economic growth.
The deficit can be financed by spending the liquid part of the fund for welfare and not by new loans. This removes excess OFZ supply from the market, does not crowd out private credit and does not increase debt service costs. However, the NWF is not infinite, and eating through the pillow without a plan to replenish it means delaying the problem rather than solving it.
It is significant that the central bank itself has already shown how to act.