Washington, 4 March 1997 (RFE/RL) - In a vote of no confidence in
the Russian economy's future, ordinary Russians are buying ever more
foreign currency even as they dip into savings to cover current
needs, according to a Russian government report.
The Russian State Statistical Committee said this week that in
January 1997 Russians spent nearly one-quarter of their incomes to
purchase $5.2 billion worth of foreign currency.
That represents an increase in private purchases of such currency
from 14.3 percent of total income in 1995 to 18.5 percent in 1996,
according to the Interfax summary of the committee report.
During the same month, the Statistical Committee reported, Russians
spent some 4.5 thousand million rubles more than they earned by
drawing on their past savings.
This combination of increased purchases of hard currency on the one
hand and negative savings on the other suggests that what is
involved here is something far greater than the capital flight some
Russian officials are now routinely pointing to.
In an interview published in Moscow on Monday, for example, Russian
finance minister Aleksandr Livshits dismissed widespread Russian
concerns about capital flight.
While a serious matter, capital flight should not be the Russian
government's first concern, Livshits warned.
"Some of that money will come back when the climate in the country
changes, but some of it will never come back: the money has already
been invested in profitable businesses in the West," the finance
Moreover, any attempt at blocking the outflow, he suggested, would
only mean that "the river would simply bypass the dam," thus leaving
the Russian government with lower tax revenues and less control over
the country's economy.
But he admitted that on this and other points, he now has "virtually
no allies" in the Russian capital.
Some of the foreign currency now in private hands clearly is going
abroad. Another part is simply being hoarded as a hedge against
And yet a third may be playing a role in that part of the Russian
economy that remains denominated in dollars rather than rubles.
Neither Livshits nor the Statistical Committee provided the data
necessary to determine exactly just how Russians are using their
foreign current purchases, especially given that they are dipping
into their existing savings to live.
But almost all the possible variants point to problems ahead.
To the extent that foreign currency purchases are in fact part of
the current capital flight from the country, such a trend would only
exacerbate the task facing Moscow and Russian managers.
Indeed, if most of the hard currency purchases go in this direction,
the size of capital flight from Russia would overwhelm any
conceivable amount of outside investment.
To the extent that such purchases are simply a hedge against
inflation, they are extremely unproductive. Further, they highlight
the lack of confidence many Russians have in both their economy and
And if such purchases do go back into that part of the Russian
economy that is still denominated in dollars, they will be
contributing to the growth of that part of the economy Moscow finds
difficult if not impossible to regulate or tax.
All of these negative outcomes are made even worse by the fact that
these hard currency purchases are taking place even as Russians draw
down their savings.
Were Russians earning more and simply deciding to invest more
abroad, as Livshits implies, that would be one thing and possibly
even a positive development.
But the figures the Russian government released this week suggest a
far more negative conclusion for the Russian economy and ultimately
for the Russian polity.
Unless the Russian government can find a way to inspire confidence
in the future, the Russian people may soon begin to desert it even as
the latest figures suggest they are deserting the Russian economy.