MOSCOW, October 27 (RIA Novosti commentator Peter Lavelle) - Finance Minister Alexei Kudrin sharply criticized the Central Bank late Wednesday for allowing the ruble to appreciate unchecked - claming it is up 50% vs. 2002 - and Prime Minister Mikhail Fradkov's plan to cut the VAT rate from 18% to 13% - saying it would cost the budget $18.2 billion.
The minister also said the ruble had appreciated 17% vs. the Central Bank's currency basket and the bank's non-interventionist attitude towards its rise was hurting Russian exports, particularly machinery. He went on to say he would be "satisfied" with an average 4.5% per annum appreciation of the ruble through 2006-2008.
Kudrin's strong rebuke is interpreted as a warning to policy-makers and the government that fiscal policy needs to be tightened, as well as greater Central Bank oversight of the ruble to maintain robust economic growth.
The ruble's appreciation, however, has less to do with policy and more a reflection of the country's strong trade surplus coupled with the macroeconomic expansion in general, while the ruble remains well below its long-term potential.
