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23 Aug, 2006 06:28

Rouble rise threat to economy, Putin warns

Rouble rise threat to economy, Putin warns

Head of state Vladimir Putin warned a stronger rouble could soon threaten Russia's economy as products became more expensive and imports soared.

For the rouble has rebounded after disaster eight years ago when the nation was in a financial crisis so deep that the currency crashed. These days, the government faces quite a different problem.

Russia has stored excess oil profits in a stabilisation fund to avoid over-inflating the economy. The finance minister reckons investing the fund’s resources is the best way to control the rouble. Only the fund can take upon itself 80 per cent of the burden for fighting current currency strengthening, says Aleksey Kudrin. The task for up to three years ahead is strict control on spending oil and gas revenue, he judges.

A combination of booming oil prices and rising capital inflows have sent the rouble soaring. Controlling inflationary pressure remains the key to Russia's monetary policy.