Russia’s economic growth below potential, but that will have to change in new national projects. The program launch was slow, but the chief economist of Vnesheconombank (VEB) Andrei Klepach said that this is due to change of investment rules. According to Klepach, the total value of these projects amounts to 27 trillion rubles ($423 billion) is only the tip of the iceberg, because the conversion of the country will have to spend much more.Money is not the problem. Needs to happen to improve the quality and control of the management of all these investment projects because the ultimate goal is not only faster growth but also the change in quality of life.Ben ARIS spoke with the Klepach in a lobby of the annual Rhodes forum, organized by the Institute for the dialogue of civilizations to discuss these issues. Below are excerpts of the conversation.Ben ARIS: in the framework of the project the government plans to push growth, in particular investment in infrastructure. However, it is very slow. Growth in the first quarter was only 0.5% and the second 0.9 percent. Why is the economy growing so slowly? What’s wrong?Andrei Klepach: there is Now a more modest increase than the 2.3% in the previous year. This year will be only 1%. But we have the potential to accelerate growth next year to, say, 1.7 per cent. The main problem is not the exact figure.Limitations imposes a very high rate monetary policy and tight restrictions of budget expenditures. We have very high real interest rate — more than 3%, but even during the budget surplus, despite national projects, our expenses are still severely limited.To accelerate the potential. If you look at the Russian business, is it profitable, but also we are witnessing the export of capital. This year, the country spent about $40 billion. This means that each year, the country spent 2% of GDP. If conditions improve, the money will remain in the country.Ben ARIS: There is a problem that the Central Bank maintains a high interest rates because the Governor Elvira Nabiullina is afraid of new sanctions. This is the mentality of war. The emphasis is on protection, not for growth, but now that built a financial fortress, it gradually subsides.Andrei Klepach: I’m not worried about new sanctions. Yes, it is a threat, but we live under sanctions for five years, and this not only limits borrowing but also a sensitive topic of access to technology. As a result, many projects have been blocked. But the sanctions now — familiar living conditions.High interest rates — not the best defense against sanctions. This restriction of growth. We need easing interest rates and policy easing spending limits.Ben ARIS: the Reserves in the national welfare Fund’s exceed 7% of GDP and now there are discussions about how to spend this extra money. Elvira assures that it is not necessary to hurry, because she was concerned about the inflationary impact of the infusion of large amounts of funds in the economy. The impact of this money is spent?Andrei Klepach: If you look at all the money, not only in the welfare Fund, but on the whole the accumulation of assets in the budget due to income from the sale of oil, it is not 7 and 9 percent of GDP, because all the money was still not transferred to the welfare Fund.We will have about 1% of the additional costs from the GDP, but it will not have a significant inflationary effect. The Ministry of economy promotes the idea of investing money abroad, where they will not be inflation. But if you spend it in the country, on the same infrastructure, it will have a minimal inflationary effect.It’s not the cost of salaries. This is the cost of roads and housing. At the same time, the Central Bank increases limits on consumer lending to prevent the emergence there of the bubble.Perhaps there are fears that the money will be used inefficiently. But it is better to start projects and to ensure that management was efficient rather than invest abroad.Ben ARIS: the Expenses will be high, but there is concern about the quality of the investment. While large public investments in large infrastructure projects as the government can guarantee a quality investment?Andrei Klepach: the problem of the quality of investment is exaggerated. Major infrastructure projects — a big problem not only in Russia. In China there are entire cities with no inhabitants, but at the same time, in recent years there built a network of high-speed Railways that changed the way of life and view of China itself.We need similar investment projects in Russia — perhaps not as large — but the biggest problem is roads in the regions.We have a plan for the modernization of transport infrastructure in villages with a population of 200 people. To upgrade not only the highway but also the entire transport system. It is a question of the quality of life for citizens. More than half of the buses in Russia over 30 years, and all need to update and digitize.Such a project requires money. We are negotiating with the government, because the necessary funds in the amount of 300 billion rubles will be invested through the Bank. We need to ensure quality disposal of these investments.Ben ARIS: required from 27 trillion rubles, I read is ensured while only 60%. It is already clear where this money is coming from?Andrei Klepach: At the Federal level will be spent 17-18 trillion rubles, (the rest will come from regional budgets and private investments), but this is the minimum desired level.To upgrade the same public transport needs much more money. If you take the motorway and everything else you will need another 2 trillion rubles. We have the money, because there are reserve funds and surplus budgets for the next three years. The problem is not the money. The problem is the political decision-making and in regulation. Additional costs mean that we need to change our fiscal rules in $ 40 (limit of the budget rules, in which all additional income is allocated to social security funds).In the past year we have slightly changed these rules, as held to Finance these projects despite budget surpluses.Ben ARIS: If this happens, what will be the potential growth of Russia?Andrei Klepach: Talk about it a lot. The Central Bank believes that it is 1.5 per cent. From my point of view it should be more like 3-4%. In the long run is closer to 3%.Potential growth can be increased by increasing investment. If investments are declining or stagnating, the growth also stagnates. This can be seen in Europe, but if you invest in physical or human capital, this will increase the potential growth rate.I’m optimistic because we now operate below their potential. We don’t need to increase spending, but rather to accelerate the actualization of these projects, so it’s not the amount of spending of funds, and the new structure of the economy, that will lead to change. The digitalization of education, health care and so on. At the same time it will create a new quality of life, and not only in Moscow. Last year we already saw in Moscow has improved the quality of life, including, thanks to the football championship. But really we need to improve the quality of life throughout the country. One of the main tasks for the web team of a new Chairman VNESHECONOMBANK Igor Shuvalov is the development of cities. I hope we will be able to fulfill this important role.