Russian Federation Council member Andrey Vavilov
Photo: Ilya Pitalev
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Fed. Council Guides Stabilization Fund
A Federation Council Budget Committee roundtable discussion yesterday recommended that the government “take as a base” a report delivered there the same day by senator and former deputy finance minister Andrey Vavilov on the future management of the stabilization fund. Vavilov wants stabilization fund money invested in Western stock market indexes. The roundtable then went a step further and recommended that those funds be used to buy the stocks and bonds of Russian state monopolies as well. This is an open challenge to the super-conservative position of the Finance Ministry and Central Bank.
The stabilization fund will be turned into the Reserve Fund and Fund for National Prosperity. Under the Budget Code, the Reserve Fund, of several hundred billion rubles, will be used to finance voluntary pension savings and to cover deficits in state Pension Fund. According to Dmitry Pankin, director of the department of international financial relations, state debt and state financial assets at the Finance Ministry, 45 percent of the Reserve Fund, just as the stabilization fund, will be placed in dollars and euros, and 10 percent of it will be in pounds sterling.
Placement of Fund for National Prosperity, Pankin said, is “more complicated,” and requires an investment strategy. Pankin was supported by Sergey Shvetsov, director of the Central Bank department of operations on financial markets, who commented that “It is a political question, not a technical one. The political question is how much money we are prepared to lose. But the Finance Ministry and Central Bank do not set the political course of the country.” He said that the Central Bank would oppose Vavilov's ideas. Konstantin Sonin, professor at the Russian Economic School, commented that the idea “will encourage ineffective and uncontrolled investment by state corporations and provoke them into default.”
The roundtable's proposal was met with a chorus of disapproval from economists. Andrey Illarionov, formerly economic adviser to Russian President Vladimir Putin and now an expert at the Cato Institute, called it “thievery.” He recalled that a New York Times editorial called Vavilov's ideology “the privatization of the stabilization fund” and suggested that Vavilov was lobbying to have the fund placed through his own Bahaman fund, IFS Hedge Fund.
The roundtable's recommendations are not binding.
www.kommersant.com
All the Article in Russian as of Nov. 16, 2007
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