Russian Deputy Prime Minister, Finance Minister Alexei Kudrin
Photo: Dmitry Dukhanin
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Money Paradox for Future President
The money offer has gone down and the growth in money supply has slowed in the second half of this year, all healthy gains of foreign exchange reserves notwithstanding. The economists call it a paradox and blame money shrinkage on large-scale budget withdrawals. The situation is expected to normalize along with the growth in budget spending and foreign money inflow.
Starting from mid-summer, neither the inflow of foreign capital nor the growth in gold and foreign exchange reserves proved able to fuel the money offer. To the contrary, the wide monetary base has somewhat narrowed since then. The reserves stepped up by $43.8 billion (or 10.9 percent) to $447 billion from June 1 to November 1, while the monetary base lost 946 billion rubles, or 17.7 percent, vs. June’s maximum of 5.35 trillion rubles.
The situation is paradoxical, says the report of Russia’s Center for Macroeconomic Analysis and Forecasts. The paradox is particularly evident given that the growth in gold and foreign exchange reserves gained momentum in October thanks to resumption of foreign capital inflow. The reserves grew by $21.5 billion that month, and both Finance Ministry and Economic Development Ministry estimated the capital inflow at between $10 billion and $11 billion.
According to analysts, the decline in the money offer roots in abrupt surge in the money outflow from the bank system to the budget accounts with the CBR. That outflow resulted from transferring to budget the money generated from settlement of Yukos debts.
Of interest is that despite narrower offer of money, its demand is still going up, although not so fast as it used to do. The rates shed to 47 percent by November vs. 60 percent in June.
Anther trend is continuation of the capital inflow. The amount was $3 billion or a bit more in November, Russia’s Deputy Prime Minister, Finance Minister Alexei Kudrin told the Global Investment and Finance Forum yesterday. And that inflow is widely expected to increase once President Vladimir Putin announced that he favored First Deputy Prime Minister Dmitry Medvedev as successor.
www.kommersant.com
All the Article in Russian as of Dec. 11, 2007
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