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. Last Updated: 07/27/2016

IMF Supports Strong Ruble Policy

Despite critics who say it slows industrial growth, the governments strong ruble policy is generally a good one, the International Monetary Fund says in a new report.

In recommendations printed in the Funds annual overview of member countries economic policies, which was released in Washington on Thursday, the Fund said:

"Most [IMF] directors believe that real appreciation [of the ruble] would be both desirable and unavoidable, and that it would be preferable for this to take place through a nominal appreciation rather than through inflation."

At the same time, some directors which the fund calls its top economists "noted that an excessive real appreciation could threaten the recovery."

Meanwhile, the nations economy continues to exhibit signs of weakness.

One respected measure of the countrys economic health, Moscow Narodny Banks Purchasing Managers Index, fell 2.5 percent to 55.1 in October from 56.5 in September the lowest level since January.

The IMF said the Central Bank should get out of the retail banking market.

The governments main dilemma is in making the right choice between inflation, which results from printing too much money, and the appreciation of the ruble, which stifles economic recovery.

Some of the IMF directors suggested that the government introduce "an inflation-targeting monetary regime."

The Central Bank expects the ruble to settle at 29 rubles per dollar, down 5.1 percent since the start of the year, while the IMF anticipates inflation of 18.6 percent by the years end implying an appreciation of the ruble in real terms of about 13 percent for the whole year.

The only major difference between the governments position and that of the IMF is over the issue of inflation. The government believes in boosting the ruble by keeping the currencys nominal depreciation below the rate of inflation, while the IMF recommends concentrating on curbing inflation in order to push the ruble higher in nominal terms.

The IMF report is very supportive of the Central Bank, calling on the government to "regularize its relationship with the Central Bank, including by paying a market-related interest rate" on its loans, which the government set at 1 percent in next years budget.

However, the IMF urged the Central Bank to become more transparent and called for it to terminate its market activities in commercial banking and precious metals.

Separately, a few IMF directors called to remove restrictions on current transactions.

Russia was among the countries recently listed by the Switzerland-based Financial Action Task Force on Money Laundering as not being very cooperative.