Currency converter
All news
News Search Topics
Use filter
You can filter your feed,
by choosing only interesting

Official says money sphere not under full control after switch to floating exchange rate

May 26, 2016, 19:48 UTC+3 MOSCOW

It was a necessary measure taken by the Central Bank, presidential aide says, but money and credit sphere was not fully controllable after the transition

1 pages in this article
© Sergey Konkov/TASS

MOSCOW, May 26. /TASS/. Money and credit sphere was not fully controllable after transition to a floating exchange rate, although it was a necessary measure taken by the Central Bank, Presidential Aide Andrey Belousov said in an interview with TASS on Thursday.

The Russian Central Bank has completed the transition to a floating exchange rate of the ruble that existed in various forms for nearly 20 years - since 1995. The Central Bank transitioned to a floating exchange rate of the ruble two months before the planned date - on January 1, 2015. In December 2014 in response to the market volatility, the Central Bank sharply raised its key rate to 17% from 10.5%.

"My position is that at the time it was the only possible solution, because any other alternative would have led to the same, only without the gold and currency reserves," Belousov said.

The instruments that were at the disposal of the Central Bank, due to objective and subjective reasons, did not work in 2014, he said.

"That's why at the end of 2014 there was a sharp transition to the simultaneous devaluation of the ruble and a simultaneous sharp growth of the key rate, which caused shock in the economy," Belousov said.

The National Wealth Fund 

At the same time, Belousov said that Russia may spend additional 50-100 bln rubles ($767 mln - $1.53 bln) from the National Wealth Fund on investment projects in case oil prices stabilize at $40 per barrel. "If oil prices stabilize at $40, I think we could spend another 50-100 bln rubles ($767 mln - $1.53 bln) without consequences," he said.

Belousov noted that it is necessary to save money from the National Wealth Fund, as long as there is non-oil and gas budget deficit. At the same time, he noted that these funds became the only resource for long-term projects after pension savings were "frozen".

"After we "froze" pension savings, now we do not have any other funds for implementation of long-term projects. Another thing is that while we have not solved the problem of non-oil and gas budget yet, we need to save money from the National Wealth Fund by all means. This is the position of the president," he said.

Non-oil and gas deficit is the difference between the amount of federal budget revenues, excluding oil and gas revenues and expenditures. In 2015, the figure was about 11% of GDP, while the budget deficit was at the level of 2.6% of GDP. In 2016, non-oil deficit is planned at about 10.7% of GDP with a total deficit of 3% of GDP.

According to Belousov, one of the main objectives of financial authorities is to reduce this figure. Non-oil and gas deficit demonstrates how dependent the country's economy is on oil and gas revenues - the higher the deficit, the greater the dependence.

As of May 1, 2016, the volume of the National Welfare Fund amounted to 4.75 trillion rubles ($72.38 bln).

"I would not consider it a significant tool that could have a systemic impact on the economy. However, I think that selective use is very important," he said.

"There are projects in which using money from the National Wealth Fund was very appropriate. This includes such projects as Yamal LNG. It progresses only because of the Fund’s money," Belousov said.

Yamal LNG is a large scale project on creating a liquefied natural gas production facility on the base of the resources in Russia’s Yamal peninsula. The project’s proven and probable gas reserves amount to 927 bln cubic meters. The project involves creating transport infrastructure, including a seaport and an airport near the Sabetta village (north-east of the Yamal Peninsula).

Show more
In other media
Partner News