"We must not spend the money from the stabilization fund for internal purposes. It contradicts with the goals associated with its creation," Mr. Illarionov announced during his speech at the opening of the international conference "The expansion of capital: from national economy to transnational" in Hong Kong, on Monday.
According to Mr. Illarionov, the stabilization fund had been created to utilize additional revenues received as a result of the favorable economic situation, primarily - unusually high oil prices on global markets.
"The most reasonable way of using the money from the stabilization fund is to make advanced payments of Russia's foreign debt," the President's aide stated.
"These funds can also be used to finance various projects in the sphere of Russia's foreign policy, namely - to open military bases abroad or to support Russian diplomatic representations. We can also invest these funds in reliable foreign assets," added Andrei Illarionov.
Russian Finance Minister Alexei Kudrin believes that the stabilization fund must not only serve as insurance in case the oil prices go down, but also to hold back the inflation in the country. Many experts think that the money accumulated by the Central Bank and in the stabilization fund must be invested in pilot projects aimed at modernization of Russia's economy.
Originally, it was planned to keep the money from the stabilization fund, which accumulates extra profits from high oil prices, intact until the market situation ceases to be favorable for oil producers and the flow of petrodollars dwindles. However, this approach has many opponents. The critics believe that the money must constantly work for economy, instead of lying dormant. Besides, the money from the fund is accumulated on special accounts of the Finance Ministry at the Central Bank. These funds are later invested in highly liquid and reliable assets, for instance: first-class foreign bonds and deposits in largest foreign banks (similar to currency reserves of the Central Bank). And here is the question to ponder. It is the Central Bank that converts rubles from the stabilization fund to foreign currencies. Meanwhile, regardless of the source, these funds, from the macroeconomic point of view constitute the excess of rubles accumulated as a result of purchases of petrodollars by the Central Bank. With creation of the stabilization fund, rubles bought through transactions on the currency stock exchange partially return to the Central Bank, which has to spend its currency reserves to cover new ruble emissions (according to latest data, Russia's currency reserves has recently reached its record amount - more than $100 billion).
