MOSCOW, September 22 (RIA Novosti) - Russian Finance Minister defended the government's fiscal policy at a State Duma session Thursday saying that the use of all revenues from oil exports would cause a significant rise in inflation.
"Had we not taken part of the revenues out of circulation and used all the funds, additional inflation could have reached 6%-8%," Kudrin told the parliament's lower chamber, which is considering the 2006 draft budget in the first reading.
The minister also said that Russia should not restrict oil exports to the world markets and should take advantage of high oil prices, that is, produce and sell as much oil as possible.
According to the Federal State Statistics Service, Russian oil production in January-July 2005 grew 2.5% year on year to 269.7 million metric tons, with oil exports slipping 0.6% to 146.6 million tons.
Most profits from oil exports are accrued in the Stabilization Fund that totaled $25.41 billion on August 1, 2005. Kudrin said the fund was a major instrument to lower inflation and balance financial system.
"The Stabilization Fund makes it possible to keep inflation in check and to cut it to the acceptable figure of 4.5% in 2008," he said. Next presidential elections in Russia are due in 2008.
Kudrin said the Stabilization Fund that had been accumulating emission means was the key to economic stability and that the fund could either be changed into foreign currency outside Russia or used in some other way that would not be detrimental to the economy.
Kudrin also said that fixed capital investment was expected to reach $100 billion in 2005 and $120-$130 billion in 2006. "This means [construction of] hundreds of new industrial plants, including some in leading high-technology sectors."
