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Foreign Debt Never Sleeps
The balance of payments in Russia is changing rapidly. The growth of imports (up 38.8 percent in the first half of 2007 over the same period last year, compared to export's 8.3-percent growth) means that the main influx of foreign currency is in the form of private capital. In the first half of 2007, according to statistics published last week by the Central Bank, the influx of private capital was $67.1 billion. As a result, payments for Russian companies for the use of foreign capital are also significantly higher. That may become a problem for the Bank.
For the first time, the balance of investment income, that is, the sum of dividends and interest payments received or paid abroad by Russian companies and authorities, has become important. In the first quarter of the year, the “income payable” entry was $8.6 billion. In the second quarter, it was $15.4 billion. Foreign debt in the first quarter rose to $339.3 billion, of which $44.3 billion is state debt. Accumulated foreign investment in Russia had reached $271.6 billion by the beginning of the year, including the reinvestment of profit.
As the role of the trade balance in economic policy falls, the capital account and balance of income will become more important. The Central Bank expects the current account to go into the negative in 2009 or 2010. Until recently, the money supply was formed predominantly within the current account. The Bank bought up export proceeds and issued rubles, and the Finance Ministry sterilized excess liquidity in the stabilization fund. To sterilize liquidity raised from the capital account, domestic loans need to be encouraged.
The net influx of capital in the second half of the year is expected to be close to zero and in 2008-2010 lower than in 2007. Thus the growth of the money mass will slow from its current extremely high 60 percent per year. That will make it easier for the Central Bank to contain inflation.
www.kommersant.com
All the Article in Russian as of July 09, 2007
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