from december 2004 to december 2005, by 3, 2 %, and from december 2005 to december 2006 – by 2, 2 %. the real effective ruble exchange rate grew 10. 5 % in 2005, and another 7. 4 % in 2006. analysis of the economic situation does not yet allow us to definitely state that appreciation in the real effective ruble rate has negatively affected gdp growth to date. however, it should be noted that growth in industries producing tradable goods is slower than in sectors producing non - tradables. in 2006, industrial output grew 3. 9 %, while retail trade went up to 13. 9 %, and construction volume increased by 15. 7 %. an important and quite unexpected factor for us, which influenced the macroeconomic situation over the past 18 months, has been the large inflow of foreign private capital. previously, up to and including 2004, we saw a net outflow of private capital. for example, the outflow totalled 25 billion dollars in 2000, and 15 billion dollars in 2001. the year 2005 saw the first net inflow of private capital in a volume of 1 billion dollars. in 2006 the net inflow of private capital grew sharply, reaching around 42 billion dollars. during the first four months of 2007, it exceeded 30 billion dollars. private capital inflow has been boosted by anticipations of further nominal ruble appreciation. in 2006, the volume of foreign currency held in cash by the population and non - financial institutions shrank by 12 billion dollars. the process of dedollarization of the economy has been intensively developing. according to the central bank estimates, the proportion of foreign currency at the end of 2006 ( both in cash and in bank deposits ) in overall money supply was around 15 %, while at the end of 1999 this share exceeded 60 %. the powerful inflow of private capital was partly due to the fact that as of july 1, 2006 all restrictions and burdens on foreign currency operations linked to movement of capital and effective until then were removed. the process of foreign exchange liberalization was fully completed. the improved investment climate and the stable economic situation also contributed to net private capital inflow. the powerful private capital inflow boosted money supply. the m2 aggregate rose by 39 % in 2005, and by 49 % in 2006. in order to restrict money supply growth, the central bank raised interest rates on commercial banks ’ deposits with the central bank several times in 2006 and 2007. currently, the interest

rate on oneweek deposits is 3 %. we are very cautious here, and are closely monitoring interest rates on international markets. a large rise in interest rates on deposits attracted by the central bank could lead to an additional inflow of speculative capital and make deposit operations useless. recently, in may 2007, the central bank raised the required reserve ratio from 3. 5 % up to 4. 0 - 4. 5 %. here, we are also trying to avoid radical changes. while adjusting the ruble exchange rate, the central bank considers the following as significant. the import of goods grows very fast under the influence of a high real ruble appreciation. in 2006, goods imports expanded by 31 %. during the first quarter of 2007, they gained 39 % compared to the first quarter of 2006. according to our estimates, if the nominal effective exchange rate of ruble remains unchanged, and oil prices stay at the level of the first five months of 2007, by 2010 imports of goods could exceed exports. in principle there is nothing wrong with it. but this will force us to consider very carefully the possibility of further nominal appreciation of the ruble. thank you for your attention.