Source Pravda.Ru

Open Corridor for Capital Outflow

Even without any permits, Russians removed and will further remove currency from Russia
Despite the criticism that came down on a governmental variant of the law “On currency regulation and currency control”, today Duma deputies at a plenary session adopted amendments to the law in the version submitted by a conciliatory commission. The law introducing amendments and additions to the clauses 6 and 8 of the law “On currency regulation and currency control” was passed by the Russian Federation State Duma on December 20, 2002. However, the Federation Council decided that uncontrolled currency withdrawal from the country disagreed with the demands of the country. That is why the amendments to the law were turned down on December 27. After that, a conciliatory commission was formed by Duma deputies and senators in order to settle all contradictions concerning the problem.

On the whole, deputies and senators managed to bring their positions to the common denominator. And now, in accordance with the amendments to the law, Russian Federation residents can withdraw from the country foreign currency in cash to the sum of not more than 10 thousand dollars. At that, they must not show any documents proving that the cash currency was previously imported to the country or legally bought on Russia’s territory. The sum of less than 3 thousand dollars is even allowed not to be included into the customs declaration. However, deputies say that it will be impossible to withdraw more than 10 thousand dollars. But if people still wish to export more currency, Chairman of the Duma budgetary and revenue committee, Mikhail Zadornov says that withdrawal of sums of more than 10 thousand dollars can be non-cash only.

Duma deputy Sergey Glazyev is one of the ardent critics of the amendments to the law on currency regulation; in an interview to Echo Moskvy radio he said that “the present-day law on currency regulation and control opens an outlet for capital withdrawal.” What is more, he says that this will also mean “legalization of capital outflow”, which will bring difficulties to foreign trade activity.

Sergey Glazyev thinks that it is the Central Bank of the Russian Federation that is to blame for all negative consequences. This is because the bank failed to develop well-defined and effective criteria for issue of permits and refusals for capital withdrawal from the country. This certainly intensifies bureaucracy and corruption. The deputy is sure that as the new law allows Russian enterprises to do their banking operations in foreign banks, this will certainly curtail the national bank system. Sergey Glazyev told journalists that the innovations introduced to the law would entail much negative, and positive changes would be insignificant at that.

However, as investigations of the Central Bank reveal, although some time ago there was no liberal law on currency regulation and control, Russians all the same withdrew capital from the country. At that, the scale of that capital outflow was considerable. According to the information provided by the Central Bank, the level of capital exported by Russians increased very much last year. And this was mostly due to the rise of the living standard. Analysts of the RF Central Bank say, actual earnings of the population are speedily increasing now, they are even ahead of the rest macroeconomic showings. Consequently, Russians are trying to save their spare money in safer places: they deposit money in foreign banks, invest in real estate and different business projects abroad.

Specialists of the Central Bank calculated that the sum left by Russians abroad this year is 2 billion dollars bigger than that in 2001 (the sum made up 12.3 billion dollars). No doubt, capital outflow will considerably increase now when the new legislation is adopted. So, deputy Sergey Glazyev is probably right. But can it be so that it is the main objective of the government and the Central Bank?

Ahtyam Ahtyrov PRAVDA.Ru

Translated by Maria Gousseva

Read the original in Russian: http://economics.pravda.ru/economics/2003/7/21/59/6778_.html

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