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International investors ready to inject funds into Russia’s economy

April 19, 2012, 2:36 UTC+3
Russia’s successful placement of sovereign Eurobonds worth 7 billion dollars at the end of March demonstrated foreign investors’ great interest in Russia
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NEW YORK, April 19 (Itar-Tass) — International investors are ready to invest funds into Russia’s economy, the first deputy chairman of the Central Bank of Russia, Alexei Ulyukayev, told an investment conference in New York on Wednesday.

The conference was devoted to the inauguration of the office of VTB Capital, Russia’s international investment banking leader owned by VTB Group, in the United States.

Russia’s successful placement of sovereign Eurobonds worth 7 billion dollars at the end of March demonstrated foreign investors’ great interest in Russia.

“According to different parameters, this was a rather huge success. An opportunity to invest in Russia evoked great interest,” he said.

Ulyukayev expressed an opinion that investors who injected funds into Russia’s sovereign debt thus evaluated the country’s monetary and fiscal system, as the structure of this borrowing has a high share of 30 year old bonds.

“Buying these securities an investor believes that there will be no risks in the budget situation during 30 years,” he said.

He noted that at present, Russia was to a certain degree in debt to investors, who by investing their money have the right to expect high revenues and moderate risks.

“If we attract money, we should guarantee that risks related to the opportunity to gain profit and return it, risks related to the national currency, the country’s financial responsibility and to the investor friendly financial system will be minimal. This is what a new government should do - through its structure, its staff and agenda to send a maximally clear signal to investors,” Ulyukayev said.

Along with this the central bank’s first deputy chairman drew attention to investors’ unwillingness to invest in Russia’s stock market that since March has been making correction.

“Investors are ready to assume risks on the debt market, but are still not ready to accept risks on the property market. This means that most questions that the market is facing are not the questions to the monetary and fiscal policy, but these are questions to property protection mechanisms, mechanisms of ensuring equal and free competition,” Ulyukayev said.

He reiterated that within the upcoming 24 months the Central Bank will complete transition to inflation targeting and to practically a free floating currency.

“Already today we have a very high degree of freedom of exchange rate formation. It’s quite probable that already this year we will take additional steps in this direction,” he said.

The Central Bank seeks to minimize its participation in the domestic foreign exchange market, but will intervene in case of volatile exchange rates.

Ulyukayev underlined that inflation targeting cannot work without the relevant fiscal policy.

“Only joint regulation of monetary and fiscal emission will yield results,” he said noting that the bank was satisfied with last year’s positive fiscal balance in Russia, although not high one.

“It seems to me that this year although officially we now register a small budget deficit, we also have rather good chances to get a positive fiscal balance again,” he said.

Ulyukayev also highlighted that beginning from May Russia could register the net inflow of capital despite its outflow in the past two quarters.

“We do not rule out that if a new government takes necessary actions to attract investments, we will be able to report the capital surplus again, beginning from May-June,” he said.

In reply to a question of Itar-Tass Ulyukayev said that within the upcoming months the Central Bank would make no changes in the interest rate policy.

“In the upcoming months - until the end of the first six months - we consider our interest rates corresponding to the market situation and have no plans to change them,” he said. “But we do not rule out that in case of additional inflation pressure, we will be ready to reconsider them.”

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