Measures to strengthen the ruble have been named: what rate will be comfortable

Experts believe that it is realistic to return it to the corridor of 80-85 per dollar

Vladimir Putin instructed the Ministry of Finance and the Central Bank to understand the reasons for the weakening of the ruble and take timely measures to strengthen the exchange rate. It is clear that there will be no problems with the first part of the order: the heads of both monetary departments, represented by Anton Siluanov and Elvira Nabiullina, have repeatedly voiced their vision of the situation with the national currency. As for practical steps, everything is still extremely ambiguous with this “homework” from the president.

According to the Cabinet of Ministers, “the decisions necessary to carry out the president’s instructions are currently being worked out.” Earlier, at the Eastern Economic Forum, Putin’s economic assistant Maxim Oreshkin said that financial authorities were preparing a package of measures to limit capital outflow. The discussion about the transformation of currency regulation has begun, “various elements are being discussed,” confirmed, in turn, Deputy Chairman of the Central Bank Alexey Guznov. In general, the matter related to the fate of the long-suffering ruble seems to have moved forward. However, today there are many more questions than answers.

It is not clear, for example, what level of exchange rate is comfortable for the state, and whether there is such a universal value that will suit everyone – exporters, importers, the Ministry of Finance, and the population. In addition, given Putin’s recent assurance that there will be no “sharp movements” in the field of currency control measures, it is unclear whether other steps will have an effect, and what exactly this will be expressed in.

“In my opinion, to strengthen the ruble exchange rate, it is necessary to reduce the outflow of capital abroad,” says Artem Deev, head of the analytical department at AMarkets. – The government together with the Central Bank is already working on such measures. There are no details yet, but there is a proposal to introduce a limit on the withdrawal of money in rubles from the Russian Federation. Plus, increasing the volume of non-resource exports of all categories, including grain and machinery, could help. Then companies would become more active in selling foreign currency earnings on the domestic market.”

Of course, it is worth understanding that the task of strengthening the Russian currency is not so much economic as political. People are accustomed to measuring stability in a country by the ratio of the ruble to world currencies: a stable exchange rate signals to them that everything is going well. Whereas financiers do not think in such categories, as Nabiullina has said more than once. And although command-administrative methods are far from the best option, now they are quite suitable for achieving the goals outlined by the president, Deev believes.

“An exchange rate around 85 will suit everyone, and the Central Bank has enough tools at its disposal to achieve this,” says financial analyst Sergei Drozdov. – The regulator could well act by analogy with what it did in February-March 2022. That is, return the rule of mandatory sale of foreign currency earnings for exporters, rein in stock exchange speculators. Why this has not happened until now is a mystery to me. However, now that pressure has come from the very top, something will certainly begin to change. Accordingly, the rate may eventually reach at least 90, and at most 85. Moreover, oil prices have risen above $95 per barrel, and discounts have narrowed. It seems that the departments are coordinating with the Ministry of Finance the issue related to the return of export proceeds to the country.”

In theory, the Central Bank should have taken measures earlier to avoid bringing the situation to a boiling point, says Alexey Vedev, director of the Center for Structural Research at RANEPA. Raising the key rate does not count: this step will not help now, since it has a very delayed effect. But in order to equalize supply and demand for the ruble, it would be logical to launch currency regulation mechanisms. That is, introduce a rule for the mandatory sale of foreign currency earnings, not on a permanent basis, but temporarily – for the fourth quarter of this year and the first quarter of 2024. Secondly, establish proper control over the outflow of capital. And then the ruble may well settle in a corridor of 80-85 that is comfortable for the economy.

“The exchange rate dynamics today are influenced mainly by fundamental factors – the state of the trade and payment balance, energy prices, the interest rate policy of the Central Bank and the external background from other markets,” notes BitRiver financial analyst Vladislav Antonov. – Therefore, among the potentially effective measures to strengthen the ruble, I would include stimulating the growth of non-resource exports through state support for high-tech industries (mechanical engineering, IT, pharmaceuticals). This will increase the inflow of currency. Further, it begs the question of introducing reasonable restrictions on the import of goods, analogues of which are produced in Russia. This will reduce the outflow of currency. It is also necessary to oblige state-owned companies to sell 100% of export proceeds and reduce the limits on the withdrawal of capital to departing foreign companies.”