Russian Finance Minister Alexei Kudrin said on Friday he expected tens of billions of dollars of foreign investment in the oil-rich nation after the rouble becomes convertible this weekend.
Kudrin, who earlier this month oversaw a deal with the Paris Club to repay the entire Soviet-era debt of $22.3 million to the group of creditor nations, also said the government was "fully armed ... to withstand speculative cash inflows".
Russia lifts all restrictions on capital account currency movements from July 1.
Russia's robust gross domestic product growth of over 6 percent annually is fuelled by record high world prices for Russia's booming oil exports but many analysts still question the sustainability of growth.
"Maybe the oil price will go down sometime squeezing currency inflows but the openness of our market and foreign investment will support them," Kudrin said, adding that he expected currency inflows to stay at the same high level in the future. Windfall oil export revenues have boosted Russia's foreign currency reserves and replenished a budget stabilisation fund which stood at 1.93 trillion roubles ($71.64 billion) on June 1.
But despite the spectacular economic performance, the last remaining restrictions on the rouble's movements continued to hamper foreign investment. For example, at the moment, foreigners have to use special accounts and reserve a share of a transaction's total amount when buying sovereign and municipal rouble bonds and when making loans to residents.
Moscow's Trust Bank estimated that foreigners bought $2 billion worth of OFZ treasury bonds in anticipation of the restrictions to be lifted causing yields to fall.
But Kudrin said that global monetary tightening would prevent OFZ yields from falling further. Russia's 894 billion roubles ($33.18 billion) sovereign bond market was until recently only available for foreigners through grey schemes or nominees because of a reserve requirement of 15 percent.
"All foreign investors in the world knew that Russia had a regime whereby any money transfer must be made to special accounts, while the requirements of these special accounts could change overnight, if the central bank deemed it necessary," Kudrin said.
"These restrictions kept many international funds away from investing in Russia. They (curbs) were symbolic, but nevertheless they existed. Now some funds will review their position (towards investing in Russia)."
Kudrin said that countries which lifted currency caps saw foreign investment soar 10-fold. He mentioned Argentina as a good example. "Now is the most convenient time for liberalisation," he added.
Kudrin said he expected the new currency regime to give Russia "tens of billions of dollars of foreign investment". President Vladimir Putin last month gave the government until July 1 to complete its work on rouble convertibility and the central bank said it would scrap its currency reserves requirements and special accounts from that date.
Comments
Comments are closed.