An attempt by the authorities to save the economy from the collapse of the ruble is called “panic”: what’s the catch

Why the increase in the key rate by the Bank of Russia had no effect

President Putin will discuss measures to strengthen the ruble at an emergency meeting with the Finance Ministry, the Financial Times (FT) reported. It will allegedly be about tightening foreign exchange controls: the agency proposes to oblige exporters to sell up to 80% of foreign currency earnings within 90 days. Last year, the introduction of similar measures helped to strengthen the position of the national currency. Why the ruble reacted sluggishly to a sharp increase in the key rate and whether the government will be able to significantly strengthen it, MK found out from experts.

The dollar on the Moscow Exchange is trading at 95 rubles, the value of the euro has fallen below 104 rubles. The latest political news played a big role in this. Putin allegedly at an emergency meeting with the Ministry of Finance plans to discuss the tightening of foreign exchange controls against the backdrop of a sharp weakening of the ruble. According to the FT, the head of the department, Anton Siluanov, was the only representative of the economic bloc who spoke in favor of this measure at the previous government meeting on August 14.

This week there were other unexpected events that set the markets in motion. On Tuesday, August 15, at an extraordinary meeting of the Bank of Russia, the key rate was raised from 8.5% to 12%. However, the increase in the rate by the Bank of Russia immediately by 3.5% did not bring the desired effect. “Due to the commercial nature of the devaluation of the ruble (that is, due to the situation with imports and exports), and not the financial one, for which the Bank of Russia is responsible, the effect of this action turned out to be extremely weak, which was reflected in a new attempt to devaluate from 95.12 rubles up to 98.99 rubles per dollar,” says Artur Meinhard, head of the analytical department for global markets at Fontvielle Investment Company.

In order to reverse the trend towards the weakening of the ruble, the state needs to ensure a sufficient inflow of foreign currency to the foreign exchange market, which is possible if the conditions for the mandatory sale of exporters’ foreign exchange earnings and restrictions on the movement of capital are met, that is, in fact, eliminating its outflow through fictitious export and other schemes. According to the Associate Professor of the Department of World Financial Markets and Fintech of the Russian University of Economics. Plekhanov Denis Perepelitsa, the main problem in ensuring the stability of the exchange rate is related to the lack of control over the actions of speculators and stock brokers, which allow the withdrawal of capital abroad according to gray schemes. The current situation with a sharp jump in the exchange rate cannot be explained solely by a decrease in exporters’ foreign exchange earnings: the influence of large players is obvious. Thus, strengthening control over the work of the foreign exchange market will stabilize the ruble exchange rate in the long term and reduce the negative effects from speculators, the expert is sure.

As investment adviser Yulia Kuznetsova recalled, when the ruble collapsed in February-March 2022, a requirement was introduced for the mandatory sale of 80% of exporters’ foreign exchange earnings. Later, in May, the standard was reduced from 80% to 50%. And already in June, when the Russian currency began to strengthen rapidly, the requirement was again softened: the sale of foreign exchange earnings remained mandatory, but the size of the share sold on the market began to be determined by the government commission for foreign investment control. “In general, the actions of the regulator are now panicky,” the expert believes. “Back on August 8, the Bank of Russia claimed that it saw no risks to financial stability due to the fall of the ruble, a week later it urgently raised the rate, and when the ruble refused to rise, it said in pursuit that it could raise it again.” If the dollar continues to rise, not fall, the Central Bank of the Russian Federation at its meeting on September 15 will raise the rate by another 2%, to 14%.

But there are also more radical statements. “Judging by the experience of previous increases related to the need to stop speculative attacks on the ruble, values ​​​​of more than 15% gave a guaranteed effect,” says Artyom Klyukin, an expert at IVA Partners Investment Company. However, excessive tightening of monetary policy may have a negative impact on economic growth, so the regulator may be cautious in raising rates. For the Russian economy, raising the rate as a whole is undesirable, as it will increase the cost of access to capital for business. According to Perepelitsa, it is much more effective to support the ruble by the mandatory sale of exporters’ foreign exchange earnings, preventing its accumulation in foreign offshores.

“The attention of the authorities to the issue of ruble devaluation already inspires optimism and hope that the necessary tools for its stabilization will be found in the coming weeks,” emphasizes Veles Capital analyst Elena Kozhukhova. Technically, it will be possible to talk about a change in the current downward trend in the ruble if the dollar is fixed below 93.85 rubles, the euro is at around 102.75 rubles, and the yuan is below 12.9 rubles, since these levels suspended the devaluation in July, the expert noted. .