Kudrin Says Ruble Plunge Is Over

ReutersFinance Minister Alexei Kudrin arriving at a news conference during a G7 meeting of finance ministers and Central Bank governors in Rome on Friday.��
Finance Minister Alexei Kudrin offered assurances over the weekend that the plummeting ruble would stay around its current level for now and that no steep devaluation of the currency should be expected.

"It is already over. The main stage is over," Kudrin said of the ruble devaluation in televised remarks from Rome on Saturday.

President Dmitry Medvedev, speaking in a televised interview Sunday, echoed Kudrin, saying the current rate of 34.56 to the U.S. dollar reflects its real purchasing power and that the Central Bank will not allow abrupt changes of the ruble rate. (Related story, p. 7.)

Kudrin spoke on the sidelines of a meeting of finance ministers from the Group of Seven developed nations, who gathered in Italy to discuss measures to counter the global economic crisis and reform international monetary institutions. Russia's delegation at the summit, led by Kudrin and including Central Bank chief Sergei Ignatyev, did not participate in the work of the gathering.

It was not clear from the Russian officials' remarks whether the ruble -- which rose 4.5 percent last week after losing more than one-third of its value against the dollar since last fall -- would be devaluated further.

But Kudrin said the ruble might strengthen as a reserve currency within five years if the government pushes for tough macroeconomic policies.

"We have all the chances in the world to strengthen our position in this direction for a midterm period, that is during five years," he said.

Kudrin added that the ruble devaluation was a "powerful medicine" for the Russian economy, giving a boost to credit and liquidity for the next two months.

Kudrin also sounded a reassuring note as he spoke of other basics of the Russian economy. Russia's budget deficit in 2009 will be less than Britain's, meaning no more than 8 percent of the gross domestic product, Kudrin said.

He said this estimate was based on the revised budget, which is calculated with an oil price of $41 per barrel.

Last week, Kremlin economic aide Arkady Dvorkovich said the 2009 budget deficit would not exceed 8 percent of GDP.

There will be no cuts in social spending in 2009, said Kudrin, who has struggled for several years to limit social spending from the Reserve Fund, which accumulated revenues from the oil prices boom.

The deficit will be covered by money from the Reserve Fund, Kudrin said in Rome. This may push the inflation rate up to 14 percent in 2009, he said.

Inflation reached 13.3 percent in 2008.

Russia will continue helping out its former Soviet allies, with Armenia standing next in line to receive credit, Kudrin said.

Moscow previously agreed to provide Belarus and Kyrgyzstan with loans of $2 billion each.

Kudrin said Ukraine has not officially turned to Russia for a stabilization loan of $5 billion, as reported in the media, but consultations are going on between the two countries' finance ministries.

Echoing a step taken by both the U.S. and German governments, Kudrin said his ministry was working on a plan to limit the fat bonuses awarded to top bank executives, particularly at state-controlled banks.

Kudrin said Russia would join the G7 as a full-fledged member in 2009, Itar-Tass reported.

The G7 comprises the finance ministers of the United States, Canada, Germany, Japan, Great Britain, France and Italy.

Since 1997, Russia has been a member of the G8, which comprises the heads of state of the G7 countries and Russia.