MOSCOW - Russia’s gold and foreign currency reserves amounted to $65.4bn as of November 14, 2003, against $64.7bn a week earlier, the Central Bank reported Thursday. This is an all time record. The previous record of $64.9bn was set on June 20, 2003, and it was repeated on July 4 and October 31.

Speaking at a session of the State Duma earlier this week, Senior Deputy Chairman of the Central Bank Oleg Vyugin said the gold and foreign currency reserves were expected to be $65bn to $66bn by the end of the year. According to him, the Central Bank revised upwards its forecast for the reserves. Given the current situation on the market, these projections will most likely have to be corrected. Of course, if the Central Bank doesn’t sell off US dollars at year-end in order to tie up excessive ruble liquidity.

However, this year, unlike last year, Central Bank officials have not said a word about the Central Bank’s massive interventions on the foreign exchange market. The market situation is such that domestic demand for dollars is currently low and unlikely to rise any time soon, while the supply of dollars is high due to high oil prices. Under the circumstances, the Central Bank is doing its best to protect the dollar.

Indeed, the Central Bank has not allowed the dollar to fall below 29.7950 RUR/USD over the past two weeks. Sergey Ignatyev, Chairman of the Central Bank, has said recently that the Bank would try to prevent the ruble’s effective exchange rate from rising by more than 6 percent. From Monday to Thursday, the Central Bank had to buy foreign currency from banks. According to different estimates, the Central Bank has purchased about $300m to $400m this week on the open market alone. Perhaps, the bank also purchased dollars directly from exporters.

Meanwhile, Russia’s debt payments have been insignificant this month. According to the Finance Ministry, Russia was to pay $217m in debts in November. This is the lowest amount of foreign debt payments in more than two years. Some analysts say the gloomy predictions of capital flight are not coming true.

This is good news, says Al Breach, chief economist at Brunswick UBS, commenting on the new record of the gold and foreign currency reserves. According to him, this is a sign that capital flight is not as bad as expected following the arrest of Mikhail Khodorkovsky, the head of the oil company YUKOS. He was arrested on tax evasion charges on October 25.

Earlier this month, Mr. Vyugin said that a net outflow of private capital from Russia could amount to $3bn to $4.5bn in the fourth quarter. This is less than in the third quarter, which the Central Bank links to new foreign borrowings by Russian companies. Perhaps, capital flight will be lower in reality. All this creates conditions for a further rise in the reserves.

“So far, the Central Bank is not ready to fully use its exchange rate policy for curbing inflation,” Mr. Vyugin said on Monday. “We are not ready to leave the market when the money and credit indicators require this. At the same time, we understand that the transition to a floating exchange rate would allow us solve the problem of inflation quickly,” he added.

Meanwhile, bank analysts say that if the gold and foreign exchange reserves continue rising for another week, it will become clear that the capital flight expectations were too pessimistic. In turn, this will provide grounds for raising forecasts regarding the size of the reserves at year-end. Analysts say the reserves will rise more in the remaining six weeks than Mr. Vyugin said. According to some estimates, they will total $67bn to $68bn.