Risks related to the corporate debt burden are under control. The Bank of Russia is monitoring financial stability, promptly and regularly adjusts its macroeconomic forecasts and its policy. The central bank is prepared to use all available instruments to stabilise the situation in case of need. However, in order to maintain macroeconomic stability we need not only a balanced policy pursued by the central bank, but also the appropriate fiscal policy, including the government debt management policy. The national debt in national currency is a basic financial instrument for any country of the world. It plays a leading part in the financial markets, is actively used by central banks in their monetary policies, as well as in banking and financial regulation. This is the role of a risk-free liquid asset, as we conditionally call it. The rates on other riskier assets are usually calculated with due account of the risk premium to government debt. As distinct from short-term interest rates regulated by central banks, long-term rates in the economy depend on inflation expectations and expectations with regard to government finance sustainability. The ‘risk-free’ is a key word describing the relationship between the financial system and the government debt. The latter may perform all these functions only if the state budget is balanced in the medium and long terms and the government may honour its obligations without resorting to defaults and the printing press. Budget discipline impacts the central bank’s ability to function as an economic and financial stabiliser amid economic shocks.
You may find a lot of examples in the Russian and international history. The Russian policy between the end of the 19th century and the start of the First World War serves as a model of how the balanced fiscal policy allowed the government to preserve national currency stability, refrain from increasing taxes, and stabilise debt in per cent of GDP at the levels acceptable to the market. At that time a sustainable economic growth persisted despite the lost war with Japan and the revolutionary upheavals. (Vice versa, uncontrolled budget deficit growth and in effect the breakdown of government finance during the First World War led to an economic collapse and triggered the 1917 revolution.) Let’s turn to more contemporary examples. The development of the so-called emerging markets, i.e. the financial markets of developing countries, started following the state budgets’ stabilisation and inflation reduction. Market uncertainty about fiscal stability may cause shocks  BIS central bankers’ speeches  1  in the financial and FX markets. Both the situation in Brazil in recent months and the Russian crisis of 1998 can serve as an example. Moreover, market concerns over the consistency of the Bank of Russia’s policy and our adherence to announced goals, which we felt in 2014 and to a lesser extent in 2015, were also linked to the budget.