Russia has become one of the highly dollarized economies. Izvestia reports that this can be seen in the partial dollarization rating of developing countries drawn up by the Moscow International Institute of Econometrics, Information Technology, Finances and Law using methodology of the U.S. National Bureau of Economic Research.
The dollarization level shows the share of funds held by households and companies in foreign exchange and the amount of foreign exchange loans taken out by the government and the corporate sector. Foreign currency bank deposits in Russia account for about a third of the money supply, foreign debt comprises a third of GDP and private sector debt makes up a half of the country's external debt. In terms of these indicators, Russia is a highly dollarized economy like Croatia and Indonesia. A higher level is demonstrated only by over-dollarized economies led by Ecuador: its consolidated index (25) exceeds Russia's index (12) by two times.
Bank of Russia chief Sergei Ignatyev announced a de-dollarization process two years ago in connection with ruble gains. However, the data on foreign exchange operations in 2004 show that this process was not making great headway. Last year, Russians paid more willingly with U.S. dollars than in 2003, and also purchased the U.S. currency in larger amounts than they sold it. In general, they bought more foreign currency than they sold. In dollar terms, Russian households purchased 1.5 times more foreign currency than in the previous year ($33.165 billion as against $22.670 billion).
Experts put dollarization in Russia down to fears of ruble depreciation and macro-economic instability. "The main factor affecting the level of dollarization is the predictability of the government's policy," says Anton Struchenevsky, an analyst with Troika Dialog. That the dollarization rating leaders are Latin American countries, such as Ecuador, Bolivia, Uruguay and Argentina (from 25 to 20), illustrates this idea. Saudi Arabia (4) and China (2) are last on the list.