Russia Should Spend Oil-and-Gas Money More Carefully :: Charter'97 :: News

“When we spend oil-and-gas money, we have to strengthen the ruble more. Thus, we need to act more carefully, and to preserve part of the money in the Stabilization Fund, so that Russian farmers and other producers do not suffer due to that strengthening of the ruble,” Russia’s Finance Minister Alexei Kudrin said in his interview to Vesti-24 TV channel.

Russia’s Finance Minister Alexei Kudrin did not predict the ruble rate for the current year. However, he named the main reasons of the ruble strengthening. “When we spend too much oil-and-gas money, the rate strengthens,” the minister added.

Kudrin also reminded that according to the Constitution of Russia, the Central Bank is responsible for the ruble rate, and the Government should not interfere in the Bank’s policy.

The minister said the Bank’s actions concerning the rate policy might be linked to “regulating the amount of money in the economy and the rate which would let the entire Russian economy work in a stable manner”.

According to the Central Bank’s preliminary data, the strengthening of ruble’s real effective rate to foreign currencies made up 3.9 percent from January 2007 to July 2007. Ruble’s nominal effective rate to foreign currencies fell by 0.3 percent in the same period.

Speaking of the Stabilization Fund, Kudrin reminded that the Central Bank and the finance Ministry not only saved every cent transferred to the Fund, but also increased the Fund by over $3 billion, in the period from July 24, 2006 to July 24, 2007. The minister compared the Fund to a “small factory for producing foreign currency”. Kudrin also explained once again why that fund should not be spent in Russia.

“Apparently, the fund which is formed by oil-and-gas incomes and currency incomes cannot be used by Russia, because dollars do not go about in Russia. We do not spend dollars on building enterprises. We spend rubles on building. And to spend rubles, we need to exchange dollars for rubles. Meanwhile, there can be just a certain amount of rubles in the economy [to avoid inflation – Kommersant]. So, that money did not just lie idle [but was invested into currency – Kommersant],” said Kudrin.
www.kommersant.com