Russian Govt To allow More Hard currency

Economics and Trade Minister German Gref announced the decision after a meeting in the Kremlin with President Vladimir Putin late Friday, the spokeswoman said.

The move would attract more investment to Russia, prompt further liberalization of the domestic economy and reduce pressure on the ruble, Gref said after the meeting.

The government plans to present a bill on the reduction to the lower house of parliament, the State Duma, this week, Gref said, adding that the cabinet hopes the legislature will pass the law before it breaks up for summer.

The government began requiring exporters to sell 75% of their hard currency revenues to the central bank after the 1998 financial collapse, when the bank's foreign exchange reserves dwindled to dangerous lows.

Recently the central bank's reserves have been at all-time highs thanks to increased oil revenues. In late June the reserves were at a record $34 billion.

The central bank was forced to print new ruble notes to buy up the excess dollars, stoking inflation which is currently about 20%, above the government's 2001 target of 12%-14%.

Exporters and businessmen have long complained that the foreign exchange regulation stifles their activities because it reduces the amount of hard currency they have available for international transactions. The requirement also causes capital flight as exporters hide oversees transactions to avoid repatriating dollars, analysts said.