"In connection with the improvement of the situation in the payment balance interventions on the currency market lead to a sharp increase of the monetary stock. Despite a certain decrease of the general level of inflation, it mainly reflects the decrease of the growth of regulated prices," says the document.
In the IMF's opinion, it's necessary to get rid of the dependency of the monetary-credit policy on the aims of currency policy.
The Bank of Russia cannot for a long time counter the pressure toward real strengthening of the ruble exchange rate conditioned by the considerable amount of positive balance of the current operations account, believes the IMF mission.
Calls on the Bank of Russia to ensure the decrease of inflation and counter the real strengthening of the ruble rate with simultaneous softening of budget policy are evidence of an increase of contradictions between different measures of economic policy, notes the IMF.
The mission believes that the monetary-credit policy must be aimed at reduction of underlying inflation by approximately 2 percent points both in 2004 and in 2005.
The mission has doubts as to whether the demand to reserve funds on operations with capital will have the desired effect. This measure may be relevant as a transitional one from the system of permissions and restrictions, but the experience of other countries shows that such restrictions lead to the increase of the cost of borrowed funds for Russian small and medium-sized enterprises which are in unfavorable conditions even without that. The effect of the demand to reserve funds on capital flows are at best temporary, as markets discover ways to evade it fast.
