The main disadvantage of the decision to repatriate foreign currency earnings by exporters is named

Economist Vedev: “The measure is non-market and can only strengthen the ruble for a short time”

It has happened: the state, by presidential decree, introduced mandatory repatriation and sale of foreign currency exporters for a period of six months. Meanwhile, during the previous two months, when the ruble was actively sliding downhill, this measure was categorically rejected by the Central Bank and the Ministry of Finance as unnecessary, if not harmful. Now it immediately produced the desired effect: on October 12, the ruble strengthened on the Moscow Exchange to 96.9 per dollar. The main question now is how long will the course towards strengthening the national currency be established?

The document signed by Vladimir Putin offers a special operating regime for 43 groups of Russian companies from the fuel and energy sector, metallurgy, chemical and forestry industries, as well as grain farming. They will provide Rosfinmonitoring and the Central Bank with indicative plans and schedules for the acquisition and sale of currency, and the process will be controlled by emissaries delegated to these companies – authorized by Rosfinmonitoring. That is, this is a serious matter, under the watchful eye of financial intelligence, you can’t spoil it. As Deputy Prime Minister Andrei Belousov explained, by doing so the authorities intend to “increase the transparency and predictability of the foreign exchange market and reduce the possibility of currency speculation.” But the point is different – we need to keep the ruble from weakening further at any cost.

The Central Bank officially approved the measure, suggesting that it would improve the liquidity situation. “Adjusting imports to tightening monetary conditions and increasing the attractiveness of ruble savings for citizens and companies will support the ruble,” the Central Bank said in a statement. But at the same time it says: “The key factors for the stability of the foreign exchange market are the foreign trade balance and the monetary policy pursued by the Bank of Russia, aimed at reducing inflation.”

Previously, the management of the Central Bank has repeatedly made it clear that there is no need for mandatory repatriation of foreign currency earnings. As Elvira Nabiullina noted in mid-September, “this will create inconvenience for companies that need revenue to purchase imported equipment and will lead to additional conversion costs. It is possible to influence demand only by increasing the attractiveness of the ruble as a store of value.”

The Ministry of Finance is hardly delighted with what happened. In April, Deputy Finance Minister Alexei Moiseev regarded the measure (temporarily introduced in March 2022) as openly repressive towards exporters: “It turned out that people were struggling with a hostile situation abroad, disobedience of banks, refusal to carry out orders to transfer money to Russia, and here we also fined them.”

While officials denied the mandatory sale of foreign currency earnings, independent experts unanimously argued that only such a measure could stop the steep decline of the ruble. And finally, this decision was made by the president.

“The measure is non-market, and can only briefly move the ruble into another corridor, I would like 85-90,” says Alexey Vedev, director of the Center for Structural Research at RANEPA. – It is necessary to normalize the sales structure so that export earnings come in a more liquid form. For example, we have a huge disproportion with India: $70 billion of Russian supplies to this country versus $5-6 billion of Indian supplies to us. I think the decision was made on the basis of a preliminary agreement with exporters, which include all the largest companies. Hence the number 43 indicated in the decree. Why didn’t the authorities do this earlier, although they could? Apparently, they hoped to get by with raising the key rate, but it didn’t work. The exchange rate continued to weaken, fueling inflation. Where did you have to go?”

As Artem Deev, head of the Amarkets department, explained, the decision did not affect all exporters, but only 43 specific groups of companies for one reason: sanctions pressure and the abundance of “gray” schemes in these industries (oil, metals, timber, grain) leads to , that a significant part of Russia’s export earnings is difficult to take into account. According to the expert, in the case of the presidential decree, we are talking about replenishing the budget, and not about how to strengthen the ruble.

“We are talking about a forced attempt to smooth out sharp fluctuations in the exchange rate; it will not lead to long-term stabilization of the ruble,” says BitRiver financial analyst Vladislav Antonov. – We need to solve fundamental problems – to reduce inflation rates, increase investment attractiveness and increase export volumes. As for the risks, this is, first of all, increased capital outflow: against the backdrop of tightening government regulation, companies will more actively withdraw assets from the country. In addition, Russia’s image as an investment destination will worsen, and a foreign currency shortage may arise in the domestic foreign exchange market (if companies reduce exports and increase imports).”