VEB's Chairman Suggests that Gold and Foreign Exchange Reserves Be Used to Promote Exports

Boris Grozovsky

Vnesheconombank Chairman Vladimir Dmitriev knows the way gold and foreign exchange reserves and pension savings should be used. He wants Central Bank reserves to be used to finance non-raw materials exports and pension savings to be invested in infrastructural projects. Potential beneficiaries became interested in Mr. Dmitriev's idea but the idea surprised experts.

Mr. Dmitriev articulated his suggestions at the Petersburg economic forum. He said that a question of using the country's gold and foreign exchange reserves effectively is becoming increasingly topical: the reserves can be maintained at a level of $50 billion and the remaining funds should be used to promote industrial exports. Mr. Dmitriev suggested that a part of the funded portion of pensions should be used to finance infrastructural projects, reported PRIME-TASS.

With the help of Central Bank reserves and pension savings, non-raw materials exports promotion would reach an all-time high, jokes an employee from the Ministry of Economic Development: it would increase by 100 times from the current levels. In 2005 the state was going to spend $700 million for industrial exports promotion, of which $500million is earmarked for extending government guarantees to exporters and banks that grant them credits. Another $100 million will be allocated from the federal budget to Roseximbank to finance exporters and 3 billion rubles will be allocated to subsidize interest on credits that exporters obtain in Russian banks.

State bankers go along with their colleague's suggestions. The Central Bank is not entitled to finance commercial projects directly and it is not supposed to do it but, in Vneshtorgbank President Andrei Kostin's opinion, it could play an active part in refinancing banks involved in promoting exporters. He is sure that in order to sell equipment, aircraft and build electrical generating and nuclear power stations abroad, we clearly need instruments for promoting exports.

Two years ago the owner of "Russian Aluminum", Oleg Deripaska suggested that Central Bank funds be invested in the construction and purchase of production facilities in Russia and abroad.

"The idea to invest the country's savings in more profitable assets is pretty sound but it is difficult to imagine how it could be put into effect", - says Central Bank Deputy Chairman Konstantin Korishchenko. The reserves have already been used inside the country - a certain amount of rubles was put into circulation against them, explains another Central Bank employee. Dmitriev's idea will make it extremely difficult for the regulator to manage money supply and will make it almost impossible to control inflation says an employee from Russia's MinFin.

Exporters can't count on the state for generosity. " We can't get a mere $5 million in budget allocations to say nothing of the amounts vastly greater than the said one'- complains a financial director of a an engineering plant.

An economist with the Development Center Oksana Osipov believes that it is more appropriate to finance exporters using ruble-denominated budgetary funds: rubles are backed by Central Bank reserves and if credits prove to be doubtful, the regulator will have to reduce money supply.