Russian finance minister predicts US$1.5 billion net capital inflow in 2006

Finance Minister Alexei Kudrin predicted Tuesday that capital flight from Russia would plunge by more than US$3 billion (EUR 2.31 billion) this year while 2006 would see US$1.5 billion (EUR 1.16 billion) return from overseas.

Capital flight soared last year as businesses pulled their cash out of the country in the wake of a campaign against jailed oil tycoon Mikhail Khodorkovsky, which saw a key production unit of his Yukos oil empire transferred to the state.

"Capital flight is being reduced fast and this dynamic must be maintained," Kudrin said at a finance ministry meeting, according to the Interfax news agency.

Kudrin said flight would fall from US$7.9 billion (EUR 6.09 billion) to US$4.8 billion (EUR 3.7 billion) this year.

Kudrin called for action "in months if not days" to restore the trust of society and business in authorities - a response to criticism from president Vladimir Putin in his state of the nation address Monday, in which he said that taxmen are terrorizing businesses with unpredictable back tax checks.

In his address, apparently aimed at reassuring businesses and foreign investors, Putin recommended a tax amnesty on repatriating money kept offshore, as well as reducing the statute of limitations on revisiting Russia's questionable privatization deals.

Meanwhile, Kudrin repeated plans to make the ruble fully convertible by 2007, a stated goal of Putin's along with doubling the nation's GDP before 2010.

"At the start of 2007 we will remove all restrictions on the movement of capital and officially our currency will be freely convertible," Interfax quoted Kudrin as saying.

Associated Press

On the picture: Finance Minister Alexei Kudrin