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Economic crisis


  Kudrin Says Ruble Devaluation Complete

By Nabi Abdullaev
Staff Writer
MOSCOW — 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 Sunday’s rate of 34.56 to the U.S. dollar reflected its real purchasing power and
that the Central Bank will not allow abrupt changes of the ruble rate.

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

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

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.

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