There appear to be some discrepancies over views on possible ruble devaluation and the rate of depletion of Russia’s foreign exchange reserves.
Russia’s finance minister sought Wednesday to reassure investors and citizens that the economy will survive the global financial turmoil, saying Russia’s rainy day fund will last for at least 7 years under the worst-case scenario.
Despite a plunge in stock markets, oil revenues and the ruble,Alexei Kudrin said Russia’s vast reserves – which have been accumulatedin the 8-year-long oil boom – “have laid a solid foundation for astable macroeconomy and the rate of the national currency.”(…)
Russia’s presidential aide Arkady Dvorkovich on Wednesday said againthat the government would not let the national currency tumble.
“The Central Bank is in full control of the situation,” Dvorkovichsaid in televised remarks. He admitted that lower oil prices may affectthe ruble, but pledged that “there will be no devaluation”.
Russia’s international reserves, the third-biggest after China’sand Japan’s, have fallen $122.7 billion, or 21 percent, since Aug. 8 asthe central bank tried to shore up the ruble. At the same time,President Dmitry Medvedev, 43, has pledged more than $200 billion oftax cuts, loans and other measures to maintain economic growth,threatened by plummeting oil prices and investor flight.
The reserves’ decline increases the chance the central bank, whichsignaled last week it is willing to gradually weaken the ruble, willstop supporting the currency. (…)
“The 1 percent devaluation feeds into capital flight,”said Osakovsky. “It helps fuel speculative attacks” on theruble. “There will be a few small devaluations and eventuallythey will be forced to accept a floating currency rate.”
That’s not necessarily bad news. The dollar-denominatedrevenue from energy exports would rise in ruble terms, making iteasier to balance the budget even with lower oil prices. At thecurrent level of 27 rubles per dollar, the 2009 budget would, bebalanced at an average Urals price of $55 a barrel, according toStruchenevsky’s estimates.
“The only solution is to devalue the ruble, to stopsupporting it,” Renaissance Capital’s Sharipova said.