Monetary base in broad definition in 2009 has grown by 15.9% – to RUR 6,4673 trillion

In April - December 2009, under conditions of the global economy reviving, increasing prices for the basic commodities of the Russian exports and the strengthening of the ruble against the background of the budget expenditures growth, the Russian monetary base increased by 50.4% in broad definition.

The main sources of the monetary base growth was due to the spending of the Reserve Fund, as well as the Central Bank purchases of foreign currency. In particular, the use of the Reserve Fund to finance budget deficit has resulted in the monetary supply by more than RUR 2 trillion. At the same time, reduction of the Bank of Russia lending to commercial banks allowed to reduce the rapid growth of the monetary base.

Therefore, the use of the Reserve Fund in 2009 started to make a significant contribution to the increase in the monetary supply. If on January 1, 2009 the total volume of the National Welfare Fund and Reserve Fund amounted to RUR 6.6121 trillion (USD 225.1 billlion), on January 1, 2010 the volume of those funds amounted to RUR 4.5995 trillion (USD 152.4 billion).

Fast expansion of budget expenditures may again result in a rapid increase of money supply: as of December 2009 results, the rate of monetary base growth in broad definition has already reached 24% and happened to be the most significant since December 2003. Herewith, the RF Central Bank capability for the sterilization of excessive monetary supply at the expense of the return of loans granted to commercial banks will be lower than in March - August 2009.

P.V. Trunin - Ph.D., Head of Laboratory for Monetary and Credit Policy