Disagreements have emerged in assessing the effectiveness of the mandatory sale of foreign currency earnings: what will happen to the ruble

Economist Nikolaev: “The Ministry of Finance is doing everything possible to ensure that the ruble does not weaken before the March elections”

The Ministry of Finance and the Bank of Russia entered into another absentee dispute in the public space. However, the topic is not new: is it necessary to extend the mandatory sale of foreign currency earnings? Siluanov’s department insists on extending the measure until the end of 2024, but the Central Bank does not see any need for this. At the same time, the arguments of both sides look quite convincing separately. But the main question is how will the final decision affect the ruble exchange rate?

As the government press service reported, a proposal is being prepared to extend the measure (set until April 30) until the end of this year. According to Deputy Prime Minister Andrei Belousov, quoted in the press release, the mandatory repatriation and sale of foreign exchange earnings helped “stabilize the situation in the domestic foreign exchange market by achieving a sufficient level of foreign exchange liquidity.” In general, the Deputy Prime Minister notes, exporters comply with the requirements of the presidential decree of October 11, which made it possible to “cover the deficit of foreign currency necessary for importers to maintain supplies of products to our country.”

As a result, “as of today, the national currency has strengthened to a level of about 90 rubles per dollar from peak values ​​in October – the rate exceeded 101 rubles per dollar.”

However, the Bank of Russia, which, as is known, is legally independent of the government, does not find compelling reasons to extend the measure. According to the regulator, its impact on the exchange rate was moderate compared to the impact of the ongoing monetary policy (key rate level) on the situation. A significant contribution to the exchange rate dynamics was also made by the growth (compared to the lows of mid-summer 2023) in the value of export volumes. In fact, the Central Bank again voiced its position of non-acceptance of the measure. As the head of the regulator, Elvira Nabiullina, repeatedly stated after the October decree was issued, currency restrictions must have a strict time frame. Firstly, many exporting companies have learned to bypass them, and secondly, they complicate international payments. First of all, to pay for the high-tech imports that the country desperately needs.

“The measure certainly had a stabilizing effect on the ruble: its weakening stopped in October,” says Igor Nikolaev, chief researcher at the Institute of Economics of the Russian Academy of Sciences. – But there is a primary fundamental factor that influences the exchange rate in the first place, namely, the dynamics of the value of exports and their ratio with imports. In this sense, the position of the Central Bank is closer to me: the regulator looks further and deeper, taking into account many more different circumstances and risks. The Ministry of Finance, as a government body, rather takes into account the political situation, doing everything in its power to ensure that the ruble does not weaken before the March presidential elections. In my opinion, strategy is more important than tactics. In addition to the short- and medium-term perspective, which the Ministry of Finance is focusing on, there is a long-term perspective.”

The ruble exchange rate now directly depends on trading activity within the country and abroad, says Oleg Kalmanovich, chief analyst at Neomarkets. According to him, at the beginning of the year the situation needs to be stabilized, but then the regulatory instrument advocated by the Ministry of Finance will no longer be necessary. We need others, more thorough ones. Until April 30, while the decree on the sale of proceeds is in effect, the Central Bank will have the opportunity to make another maneuver in its monetary policy aimed at gradually strengthening the national currency.

“The sale of foreign currency earnings is a measure that was initially positioned as temporary. Which, by the way, is what the Bank of Russia also reminds us of,” says Alexander Shneiderman, head of the sales and customer support department at Alfa-Forex. – This step is intended to balance the trade balance in the country at the beginning of the year, when some processes slow down under the influence of the New Year holidays – first in Russia, then in China. The extension is in question until the Ministry of Finance has received active support from other departments.”

But the director of the Center for Structural Research at RANEPA, Alexey Vedev, shares the position of the Ministry of Finance. Since in October the ruble strengthened by more than 4% – from 97 to 93.1 per dollar, and today the exchange rate is 88.4 rubles, there is a clear stabilization. Moreover, good preconditions have been created for reducing inflation. Why the Central Bank insists on not extending a measure that has fully proven its effectiveness is not clear to MK’s interlocutor.

It is interesting that a number of analysts point to compromise options for resolving the issue. Thus, according to investment strategist at BCS World of Investments Alexander Bakhtin, Russian financial authorities could soften the parameters for the sale of foreign currency earnings by exporters from the current 90% to 50-70%. The threshold may change depending on the price picture in commodity markets, exchange rate dynamics, and macroeconomic indicators.