Net Capital Outflows at $140Bln

Net capital outflow from Russia was $26 billion in September, Central Bank Chairman Sergei Ignatyev said Friday.

"Net capital outflow in September, based on our preliminary estimates, was $26 billion," Ignatyev said at a State Duma session.

BNP Paribas has estimated that investors have withdrawn about $140 billion from the country since the start of August.

The Central Bank warned banks Thursday against increasing the amount of foreign currency they hold above the average level from Aug. 1 to Oct. 25.

"I think in most cases it happens within the law and is done in the commercial interest of the banks," Ignatyev said. "Nonetheless, such actions at the moment don't help stabilize the economic situation in Russia."

He also said the country aimed to let the ruble, whose value is now pegged to other currencies, float freely on currency markets in the next few years.

Russia pegs the ruble to a basket of the dollar and the euro, allowing it to float only within a range of 4 percent and intervening if necessary.

Ignatyev said that next year it will still operate "the managed floating currency rate of the ruble" but that in the next four years it "will continue to move toward a regime of a freely floating currency rate," easing the ruble's dependence on the currency basket.

Ignatyev said that would allow the Central Bank to increase the role of interest rates in its monetary policy. Interest rates help control economic growth as well as the relative value of a currency.

The real ruble rate will probably appreciate between 3.5 percent and 4.5 percent this year, he said.

Ignatyev also said inflation would probably reach about 13 percent by the end of the year, more than the government's 11.8 percent forecast.

(Bloomberg, AP)