Russia's economy - never had it so good?

[Rubber Duck]

MOSCOW. (Ian Pryde for RIA Novosti) - Much attention this week was focused on the visits to Moscow by the German and US foreign ministers and the Russia-EU summit in Samara.

The arrival of an IMF delegation and changes in Russia's budget process went largely unnoticed, and yet they shed an interesting light on the profound changes of recent years.

Russia's economy seems to be awash with money, and at first sight the country has never had it so good.

This week, the Central Bank of Russia announced that between 4 and 11 May 2007, Russia's gold and foreign currency reserves had increased by $14.2 billion to $386.3 billion, making them the third largest in the world, although they remain far lower than China's figure of over $1 trillion.

On preliminary figures, Russia's budget surplus in the first quarter of 2007 was 471.9 billion rubles ($18.2 billion).

It is of course no secret that Russia's economy has recovered on the back of high oil and gas prices, although other commodities such as coal, metals and timber are important and arms sales and machinery also contribute to Russia's exports.

The real questions are how to manage all this money and at the same time ensure Russia's economic diversification and continued growth.

Russia is coping with the first task rather better than the second.

It has paid back its sovereign debt to the Paris Club, saving billions of dollars a year in interest payments, and no longer needs to go cap in hand to the IMF for periodic bailouts as happened during much of the 1990s.

Russia has set up a Stabilization Fund on the lines of Norway and other countries to soak up petrodollars and prevent the Dutch disease: by April 1, 2007, the Fund had reached 2.8 trillion rubles ($108.02 billion) and inflation has been falling, although it is still too high.....

http://en.rian.ru/analysis/20070521/65803931.html