MOSCOW — Finance Minister Alexei Kudrin said Friday that money held in the stabilization fund may be invested in AAA-rated foreign securities within three months.
The fund is currently held in cash at the Central Bank and is under the control of the Finance Ministry.
Kudrin also said the fund has been used only for early debt repayments and denied funds had been diverted for other government spending. The stabilization fund stood at $21.6 billion on July 1.
From an economic and political perspective, the idea to invest the stabilization fund in high-rated foreign securities is prudent. The temptation to use the fund for short-term political purposes before the 2007-08 election cycle will decrease, as well as subject the invest funds to international investment standards.
The Ministry of Finance is currently working on legislation that would allow for investment of some of the funds in foreign securities. Market players would like to see Russia follow other countries precedents, which include non-governmental fund management. An independent private management company runs Alaska's fund. In Kazakhstan, the fund is managed by the country's Central Bank.
While the Finance Ministry has been the government agency responsible for the Stabilization Fund and managed it well, it would be wise if at least 50% of the fund was turned-over to Central Bank supervision.