OREANDA-NEWS. February 27, 2009. The Bank of Russia points to lower expectations of further weakening of the ruble, as underscored by suspended growth of private forex deposits and the bank’s currency liabilities, First Deputy CBR Chairman Alexei Ulyukaev said. “Forex deposit growth has stalled, both private and corporate deposits and currency liabilities of banks also ceased to grow. This means that the business on devaluation expectations is playing itself out”, he said addressing bankers in the Russian Union of Industrialists and Entrepreneurs.

At a later time he noted that private forex deposits ceased to climb and their share remains flat in February, around 32%, he said. The Bank of Russia expects capital outflow from Russia to stop. “The zero result is very likely, there will be no outflow at all”, he said. Ulyukaev expects capital outflow in 2009 much lower than in official forecasts. First and foremost, this is attributable to the fact that banks will refinance most of their external liabilities, including due to earlier accumulated forex assets. Ulyukaev reiterated that the Bank of Russia will liberalize refinancing against collateral of lending requirements and agreed to the thesis that a reduction in refinancing limits is more efficient for the money market than interest rate hikes.

CBR does not plan to change the 2009 inflation target of 13%. We will not revise the 13% target and there are reasons to believe that we will meet it”, he said and noted that both global price factors and money supply trend are in place here. He said that the impact of the ruble devaluation factor on inflation has not yet been fully studied. According to Ulyukaev, a 35% ruble devaluation accounts for nearly half of inflation growth in 2009. “There are various estimates of the transfer rate… I believe that lower estimates of the transfer rate are fair, around 0.1-0.2. This makes up nearly half of the inflation growth which I mentioned (13% in 2009)”. Ulyukaev said that bank borrowings on the domestic and external markets will decrease, but a strong growth driver for liquidity will emerge – the budget deficit.

According to him, this means that given the deficit equal to 8% of GDP, banks will receive from the budget on a monthly basis by RUB 200 bn more on budget recipient accounts than in 2008. Ulyukaev also pointed out that budget deficit will amount to nearly RUB 3.2 tn. Of this amount RUB 2.7 tn will be financed using the reserve fund resources. “We are interested precisely in the amount from the reserve fund”, he said and noted that CBR will have to issue rubles. “It will make no difference whether budget or monetary issue will take place, it will have no impact on inflation, since CBR will have to reduce net loans to banks by this amount”, he said.