Among other things, a proposal is currently being discussed to reduce the proportion of export earnings in foreign currency that must be exchanged for rubles to 50 percent, from today’s 80 percent, reports the news agency Bloomberg with reference to two anonymous sources.
Sharply increased export revenues
The ruble is the growth currency that has performed best on the market this year – despite the Ukraine war. When Russian forces attacked on February 24 and the West responded with massive sanctions, the ruble first plummeted.
But after the first shock and with the help of a sharp rise in interest rates and capital controls, the central bank in Moscow regained the value of the Russian currency. And now the price has risen by 30 percent since the end of February.
High energy prices, Western sanctions and Russian restrictions are behind the development. Among other things, the sanctions have hit Russian imports hard, while capital controls have riveted the demand for foreign currencies in Russia.
The ruble hit a new five-year high on Friday and continued to rise by just over 4 percent in Monday’s trading. But it is not the market that sets the course. If capital controls were abolished completely, the ruble would fall to 70-80 rubles per dollar, according to Tatiana Orlova, an economist at Oxford Economics. It can be compared with today’s exchange rate of just under 58 rubles per dollar.
Larger deficit
For the Russian state, the currently artificially strong ruble can be a heavy burden, as the tax revenues from the large energy exports come in foreign currency while the state’s expenses are then to be paid in rubles.
– The stronger the ruble exchange rate, the larger the deficit. And that makes it harder for exporters, raising their costs and lowering revenues, Evgeny Kogan, a professor at the Moscow School of Economics, told Bloomberg.
– If this continues, for say six months, it would be very unpleasant, he adds.
Neither Russia’s Ministry of Finance nor the central bank want to comment on Bloomberg’s data on softened capital controls in Russia.