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Russia’s Putin orders $2.3 billion pension hike as inflation bites

© Reuters. Russian President Vladimir Putin delivers a speech during an event marking the 300th anniversary of the foundation of the Russian prosecution service in Moscow, Russia January 12, 2022. Sputnik/Alexey Vitvitsky/Pool via REUTERS

By Katya Golubkova

MOSCOW (Reuters) -Russian President Vladimir Putin called on Wednesday for an 8.6% rise in public pensions this year, slightly above the inflation rate, increasing state social spending by another $2.3 billion as consumer price inflation hovers near six-year highs.

Ahead of parliamentary elections last year Putin ordered one-off social payments and public sector salary hikes worth at least 500 billion roubles ($7 billion), which analysts said may further fuel inflation.

Inflation in Russia accelerated to 8.4% last year, preliminary data showed, nearly its highest level since early 2016 and double the central bank’s target of 4%, leading the regulator to tighten monetary policy.

Rising consumer prices are hitting living standards, while Putin has for years promised to boost real disposable incomes. Last year, he called for pre-emptive measures to stop inflation from spiralling.

On Wednesday, he said pensions in Russia should be hiked by 8.6%, slightly above the preliminary inflation reading for last year and higher than the initially planned 5.9% increase.

“Previously taken decisions will not cover for people’s expenses resulting from accelerated inflation last year,” Putin told a government meeting. “So I propose… to increase pensions by slightly more than inflation.”

As a result, pension payouts would rise by 1,400 roubles on average, TASS news agency said, to nearly 19,000 roubles per month. The move would cost the state budget an additional 172.7 billion roubles ($2.3 billion), the finance ministry said.

The central bank expects inflation to slow to 4%-4.5% by the end of this year. It raised its benchmark interest rate to 8.5% from 4.25% over the course of last year and has said more than one rate hike is still possible in coming months.

Russia’s Putin orders $2.3 billion pension hike as inflation bites

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