Foreign currency flight continues

In the third quarter of 2022, Russians again withdrew almost 1.5 trillion rubles in foreign currency to foreign accounts. Garegin Tosunyan, President of the Association of Russian Banks, Academician of the Russian Academy of Sciences, announced this during a press conference at the DOS.

According to him, this is 26 times more than in the third quarter of the previous year. According to analysts, by December 1, 2022, all deposits of Russians in foreign currency amounted to 8.4 trillion rubles, while only 3.5 trillion rubles of them were in Russian banks. At the same time, as early as February 1, 2022, the advantage was in the other direction and the Russians kept most of the currency in Russian accounts. According to experts, depositors began to withdraw currency to foreign banks especially actively in the second half of 2022, when the Central Bank increased the limit on its transfer.

As noted by the President of the Association of Russian Banks, Academician of the Russian Academy of Sciences Garegin Tosunyan, in order to reverse this trend, all Russian managers should make every effort to restore confidence in the ruble, and not “drive” the population into the national currency by administrative measures alone:

“People need to be convinced not through persuasion and some kind of declarations, but through the fact that they see that in the Russian currency the rates are higher on deposits; so that they can see that the Russian currency has been strengthening for several years. I believe that the Central Bank of the Russian Federation behaved quite adequately, removing the restrictions that it had previously imposed on foreign currency. This is how he strengthens the credibility of his policies.”

As Garegin Tosunyan recalled, in 2022 the Central Bank of the Russian Federation revised the amount of foreign currency transfers allowed for citizens abroad several times:

“At first it was $5,000, then $10,000, and in mid-May they were already allowed to withdraw $150,000. When restrictions were expanded to $1 million a month from July 1, fairly decent amounts were withdrawn abroad ($5.5 billion were withdrawn from July 1). However, after the strengthening of the ruble, this outflow slightly decreased. But today we hear that the ruble should be weakened to 75 rubles to the dollar, or even to 80 rubles to the dollar; that a too strong ruble is not beneficial for exporters and the Russian budget. Of course, such conversations do not increase people’s confidence in the ruble, so the outflow continues. So, in the third quarter of 2022, the Russians again withdrew almost 1.5 trillion rubles in foreign currency to foreign accounts. This indicates that confidence in the national currency needs to be strengthened not on a horizon of 2-3 months, but 5-10 years, and we do not have such long-term horizons, because different departments announce contradictory theses. The situation is now very complicated, and I cannot say that confidence in the national currency is now being ensured.”

The second participant of the press conference, Dmitry Potapenko, an economist and manager of the Management Development Group strategic management fund, agreed with the opinion of Garegin Tosunyan. In his opinion, partly all these “near-currency passions” are mitigated by the fact that for the majority of Russians the currency remains something exotic:

“Let me remind you that before recent events, 6 million Russians had foreign passports, 3 million traveled abroad, and now these numbers have decreased by a multiple. <…> If you are not going to travel abroad, but use the currency only for savings, then in such cases I always say that the dollar is an investment paper “from two years”. It can bring some income only in the long run. But if you have any excess income, then I always advise at least a tenth of it to be stored in dollars just in case.

The strengthening of the ruble, according to Dmitry Potapenko, is not facilitated by talks about issuing new banknotes:

“When I now hear talk about the need to print banknotes in denominations of 5 and 10 rubles, it becomes clear to me that the financial authorities do not have many tools to keep a deficit budget, and one of them is emission. Another tool is the weakening of the ruble, which they are still doing in the “light” range (this is 71-74 rubles per dollar, and the “non-light” range is 82-89 rubles per dollar). The only question now is how they are going to continue to “walk around the buffet” in order to make ends meet.”

Summing up the results of this discussion, I would like to add that the most likely solution for the general population of the Russian population from worries about the ratio of exchange rates is the fall in real incomes and the continuing rise in prices for everyday goods. So if everything continues in the same spirit, then soon there will be no need to worry about the fate of the foreign exchange savings of Russians: they will simply eat them up.

Sergei Ishkov.

Photo by Moskovskaya Pravda