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. Last Updated: 07/27/2016

Dubinin Says Crux Looms for Market

Foreign investors have been pulling their money out of Russia's currency market at a brisk clip in recent weeks in a reflection of worldwide instability, the country's Central Bank chairman said Friday.


Sergei Dubinin said about $5 billion had left the market in recent weeks, and Russian banks have been buying dollars in an attempt to cover the outflow.


But in remarks to the State Duma, the lower house of parliament, Dubinin expressed confidence that if world markets show signs of stabilization in the coming weeks, the pressure on Russia also will ease.


"The next seven to 10 days will be decisive,'' Dubinin said.


Also Friday, a top officer of the World Bank said Russian economic reforms are "broadly on track,'' and the government could receive a $250 million loan installment aimed at revamping its welfare and pension system.


Caio Koch-Weser, managing director of the World Bank, wrapped up a three-day visit in which he met with top Kremlin and parliamentary officials. World Bank lending to Russia is slated to reach up to $3 billion annually in the coming years.


"Russia has accelerated structural reforms over the past year, and our growing level of financing for Russia reflects strong support for a strong program,'' Koch-Weser said. "We are broadly on track.''


In his remarks about currency instability, Dubinin expressed optimism as well, saying the Central Bank and the government "will be able to stabilize the situation and prevent any sharp moves in the exchange rate and on financial markets.''


Speaking to reporters later, Dubinin said the Central Bank's gross foreign exchange and gold reserves totaled $21.5 billion as of Friday.


On Nov. 10, Dubinin reported reserves of $22.6 billion. On Friday, Dubinin noted that the central bank has had to spend heavily from its reserves in recent weeks to steady the ruble exchange rate.


Dubinin also said the bank was not planning another increase in interest rates, and predicted that rates would decline "when the situation on our market and in the world settles down'' -- perhaps before the end of the year.


On Nov. 10, the Central Bank raised its refinancing rate to 28 percent from 21 percent to take pressure off the markets. The bank also increased reserve requirements on hard-currency accounts in an effort to tighten liquidity.


Before the rate increases, Dubinin noted, the Central Bank had hoped the international market instability would pass Russia by.


"This view turned out to be overly optimistic,'' he said.