• ACI Russia

08/17/1998 08:34:50 Text of Russian authorities' rouble statement

MOSCOW, Aug 17 (Reuters) - The following is a Reuters translation of the text of the joint declaration of the Russian government and central bank on Monday: "The time that has passed since the government of the Russian Federation and the Bank of Russia set mid-term goals of currency policy has been marked with a major complication of the internal economic situation for Russia. The fundamental factors of this were: the international financial crisis, which started in the countries of Southeast Asia and later moved into a global phase; the general depressed state of all emerging markets, including the Russian financial market; a fall in world prices on the main items of Russian exports, first and foremost oil, which brought about a worsening of the foreign trade balance. At the same time the state of the federal budget became critically complicated, confidence in Russian state securities fell, which brought about a flight of foreign capital and a fall in the country's gold and currency reserves. Under these conditions certain corrective steps in the Russian Federation's current exchange rate policy became unavoidable. To protect national economic interests, avoid a drawing-down of currency reserves and liquidate accumulated disproportions in the foreign economic sphere, the Russian government and Bank of Russia declare that they are reviewing their exchange rate policy and the methods of determining the rouble exchange rate. In such complicated conditions it is inexpedient to maintain strict daily boundaries for the oscillation of the rouble exchange rate with regard to the rates announced by the Bank of Russia for buying and selling U.S. dollars on the interbank currency market. Therefore, the system for determining the official exchange rate for the Russian rouble is being changed, and will be determined by the results of daily operations on the exchange- and non-exchange-sectors of the internal currency market. In this regard, the government of Russia and the central bank are obliged to use budgetary, monetary and currency policies to support such conditions on the internal currency market which are necessary for supporting the predictible dynamics of the exchange rate. As earlier, the possibility of unrestricted purchase and sale of foreign currency by organisations and individuals, within the framework of existing laws and on the basis of the market currency rate, will be supported. The government of the Russian Federation and the central bank consider that, with legislative support, the government's package of economic stabilisation measures can be implemented, and gold and currency reserves will support the possibility of maintaining the rouble exchange rate until the end of the present year between 6.0 and 9.5 roubles to the U.S. dollar. The carrying out of the exchange policy under the new conditions will be based on the policy of a balanced budget and sufficiently strict monetary policy. A flexible interest rate policy will play a key role, supporting a holding back of inflationary expectations and the sufficient attractiveness of investment in securities denominated in the Russian national currrency, with the support of state currency reserves to a sufficient level. The determination of the official rouble exchange rate on the basis of market quotations will allow a decrease in the sharpness of speculative attacks on the Russian rouble which led to unjustified losses to the currency reserves of the central bank. The Russian government and the central bank simultaneously undertake the following step necessary under the current complicated conditions: capital restrictions on currency exchange operations by non-residents to defend the Russian market from the influence of global short-term speculative capital flows. At the same time, the Russian government and the central bank fully confirm international obligations taken upon themselves in 1996 on the non-imposition of limits to the convertability of the rouble for current balance-of-payment operations. Sergei Kiryenko, Prime Minister Sergei Dubinin, Chairman of the Central Bank

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