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. Last Updated: 07/27/2016

Kudrin Warns Against Increases in Spending

IZHEVSK -- The ruble's exchange rate will stabilize in the medium term if the country manages to save rather than spend its oil and gas windfall, Finance Minister Alexei Kudrin has said in an interview.

"Unfortunately, next year we will even boost our spending of oil and gas revenues, but then within the next three years we will cut it. I think the ruble exchange rate will stabilize within the next three years," Kudrin said.

The Central Bank has allowed the ruble to appreciate by 1.2 percent this year against the dollar and euro currency basket it uses to guide currency interventions, as it seeks to curb inflation to 8 percent this year.

Kudrin argued that the appreciation policy was a result of an election-year spending spree ordered by the government despite his objections.

"The strong ruble is not the Central Bank's idea but the result of excessive spending of oil and gas revenues. A country that receives such revenues and starts spending them has already caught Dutch disease," Kudrin said.

Putin has announced plans to spend an additional 680 billion rubles ($26.7 billion) on roads, housing and science. Kudrin said the bulk of the money would not be spent this year.

"If we spend the money on road-building, pensions or factory-building we will either have a stronger ruble or higher inflation. Since inflation is capped, the Central Bank has to let the ruble appreciate," Kudrin said.

"I think we should contain ruble appreciation not through issuing orders to the Central Bank but by cutting government spending," Kudrin said.