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. Last Updated: 07/27/2016

Kiriyenko Hails Ruble Devaluation




Russia's former Prime Minister Sergei Kiriyenko, who spent much of his time in office struggling against devaluation, said Wednesday that the ruble's fall had been beneficial but offered limited breathing space.


Kiriyenko, who headed the government in the throes of crisis from April until August last year, said his intention had been to let the currency drop gradually, but instead "we ended up with the most uncontrolled barbaric process."


"We got the worst of all options, but even this produced some results. A window of opportunity has appeared," he said in an interview.


Kiriyenko, 37, said Russia now had a couple of years to implement structural and tax reforms or face a new debt crisis.


He said the sharp devaluation had made Russian producers more competitive, cut imports and boosted exports. Industrial output is now rising, the balance of payments is positive and there is a primary budget surplus, which excludes debt servicing.


"Generally, after taking such a difficult path as the August crisis, problems have been resolved," Kiriyenko said.


"There is now a chance to make the necessary changes. It is much simpler to carry out tax system reforms or state spending reforms when the economy has a primary budget surplus, a positive balance of payments, and no GKO [treasury bill] debt pyramid which reduced the whole budget to ashes."


Russia's government previously had to issue new GKOs to cover its budget deficit and to pay out on maturing paper.


Kiriyenko said the short-term outlook was now more stable. "There is no danger of default. There is a chance of reaching agreement on foreign debt restructuring with creditors.


"We have just been saved by the sharp devaluation and a positive trend on world markets for raw materials and Russia's main export goods," he added.


The former prime minister said the ruble had been artificially high and "had to be let go." The ruble, about six to the dollar before the Aug. 17 effective devaluation, has since lost more than 70 percent of its value and is now about 24 per dollar.


Kiriyenko said the real rate of the ruble last August, based on its purchasing power, was about 8-8.5 to the dollar.