CNBC Interview: Minister of Finance for Russia, Anton Siluanov

Following is the unofficial transcript of a CNBC interview with Anton Siluanov, Minister of Finance for Russia, by Julia Chatterley at the IMF Spring Meetings, Washington, on Tuesday 21st April 2015.

Julia Chatterley (JC): There seems to be a greater sense of confidence coming from Russia now that the worst is over. Are we talking in terms of exchange rate volatility, destabilisation of oil price it seems – what does the worst case over mean?

Anton Siluanov (AS): Well indeed, the worst is over. And the worst part of it was at the end of 2015, and the begin – the end of 2014, and the beginning of 2015. We experienced two kinds of shocks – external shocks. One from the oil price, the plunge of the oil price, and the second from the limitations on capital inflows. What was the result of that? The inflation went up and the interest rates went up. And so we had to review the budget to cut some of the expenditures and redistribute them within the budget for this year.

JC: Do you believe now if you look at the economy and you look at the environment, do you believe the scope now for rates to go low to support the economy? Because the currency is under pressure today through speculation that you will, or the central bank will, cut rates. There's already concerns about the currency if you lower rates.

AS: Well, I wouldn't say that the ruble appreciated because of the speculations. We see some fundamentals because the capital outflow has lowered and people started to sell their dollars that they acquired in the end of the last year. And we also see the slowdown of the capital outflow from this current quarter from comparing to the previous. And this has been the result of the measures we have taken, we as the government. We have cut some expenditures, we have decided not to index to the level of inflation public wages and pensions, and social benefits. And we see that this stabilisation will give ground for the central bank to review their current interest rates. So we see that the decisions that we have taken have given them the ability to review the current interest rate.

JC: The lower rates speculation today is impacting the currency negatively. So it argues that you're still vulnerable in a sense to the risk of speculation however that moves the currency. In line with that, can I ask what your base case is for sanctions going forward here? Do you expect them to continue, and how do you plan to deal with that if so?

AS: Well, we basically extend the current situation for the future and the assumptions that we make taking decisions, budgetary decisions, fiscal decisions, is that the current situation will continue for a while.

JC: So that's what you're expecting.

AS: We do not expect major changes to the current situation.

JC: So given that you've got significantly restricted access to the international capital markets, how do you plan to cope with the big corporate refinances that you've got this year? Where is the money going to come from to help them?

AS: Well as I mentioned we see the decrease in the capital outflow, and in this sense the first quarter was the hardest time for us in terms of capital outflow and debt repayments including corporate debt repayments. We see the improvements on the financial markets as well. The demand for local currency, the sovereign local currency bonds, has increase significantly. The demand outnumbers the supply by two, three times, and that's very impressive. As for the corporations, some of the big Russian corporations are currently preparing plans for raising funds on the international capital markets. We see that the yields are going down, and are almost at the pre-crisis levels. So the first step as we see it, our corporates will borrow funds from the capital markets, and we will monitor the situation and maybe, maybe next year the sovereign will borrow from the international capital market as well.

JC: Russia recently joined the AIIB as one of the big topics of discussion here at the IMF. Given the US is effectively cutting you out of the dollar funding markets, is this now a time for the likes of Russia and China to be looking at some kind of alternative?

AS: Given the current situation in terms of sanctions, we are always open to new markets, and looking for new markets. China is one of the largest investors in the world, and we also see that some of the projects that we were planning together with the World Bank are suspended. And these, they're social projects. Of course our participation in the AIIB is an important step towards diversification of the capital inflows in Russia, and we are planning to realise some important infrastructure projects with the resources of this Asia Infrastructure Investment Bank, which will give boost to the economic development in the region and to our bilateral relationships with China.

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