The Ministry of Finance considered the ruble exchange rate not “fair” enough: what’s the catch

The foreign exchange market has its own rules of the game

“According to our estimates, the fair exchange rate of the ruble is stronger than the current one, which can be observed on the market,” Deputy Finance Minister Vladimir Kolychev said. This saying of a respected official deserves the most detailed analysis. The fact is that the very word “fair” does not fit in at all, does not intersect with the laws of the free market, exchange trading and objective economic reality in general. With similar success, one can put such concepts as “sour” and “thick”, or “small” and “soft” on the same semantic board.

Being one of the main categories of ethics and socio-philosophical thought, in Roman law justice (Justitia) is interpreted as “a constant and unswerving will to render to everyone his right” (according to Ulpian, a lawyer of the early Roman Empire). This term itself is an analogue of the Russian word “truth” and is found in the Latin translation of the Bible: “blessed are those who hunger for truth.” The brilliant linguist Ushakov in his explanatory dictionary says that justice is following the truth, the norm in relations between people. Which should be based on the principles of equality and impartiality.

But life is infinite far from these ideals. The ruble exchange rate is not born in a vacuum, not in some kind of “crystal” framework established by the Ministry of Finance or the Central Bank, it arises in a stormy, unpredictable market environment that is not subject to any regulation. Exchange quotations are determined by objective macroeconomic factors: GDP growth rates, labor productivity, parameters of foreign trade transactions, and capital flows. The most important role is also played by geopolitical events and verbal interventions of the powers that be.

And in general, everything is relative: for someone one course is fair, for someone else. As they say, to whom is a watermelon, and to whom is pork cartilage. For example, it is beneficial for exporters if the dollar costs 100 rubles, importers will be happy with the exchange rate of 50 for an “American”, and investors need the dollar to trade for, say, 30 rubles in the morning, and 120 in the evening. And even with government departments – different types of ruble. The Ministry of Finance has its own idea of ​​fairness (based on the state of the budget), the Ministry of Economic Development has its own (based on GDP dynamics), the Central Bank has its own (based on inflation parameters), the Ministry of Agriculture has its own (based on crop volumes). The exchange brings together the interests of all parties synthetically, it exists in order to flexibly and impartially form the only correct exchange rate for this particular situation. This is not reinforced concrete Soviet 64 kopecks per dollar.

In June last year, the dollar cost an average of 56 rubles, the euro – 58. In April 2023 – 82 and 89, respectively. Then the Russian currency strengthened for objective reasons, in response to the restrictive measures of the Central Bank and the acute shortage of Western banknotes. Today it is also weakening due to some kind of “higher justice”, naturally responding to a lot of circumstances – a drop in the income of raw material exporters, an increase in the budget deficit, tariffs of natural monopolies, and producers’ costs. By the way, in mid-February 2022, the weighted average exchange rate of the ruble against the dollar was 83.5. That is, over the year, our monetary unit returned almost to the same point, having done a kind of “lap of honor”, ​​and there were several ups and downs along the way.

With his very controversial remark, Vladimir Kolychev continued a number of similar statements that other sovereign people had previously noted. I remember that in April 2022, Valentina Matvienko was outraged by the behavior of retailers: when the ruble sank sharply in early March, all goods rose in price from 30% to 70%, and when it then stabilized to 75 per dollar, “and citizens expected that now the price tags would be rewritten , no one rewrote down”. “This is dishonest, wrong, dishonest on the part of manufacturers and retail chains. Let’s return the old price tags,” the speaker of the Federation Council noted. But for the market there are no such concepts as “dishonest”: pricing in the private sector is its area of ​​responsibility, not the state. Last year’s sanctions force majeure dictated its own rules of the game: both suppliers and merchants had to strictly follow them in order to survive.

Or, for example, in April 2021, the Ministry of Energy announced the thesis according to which measures to stabilize the fuel market made it possible to achieve a “fair retail price” for gasoline. It certainly did not meet the classic market criteria: what else is fair, when the domestic price of gasoline is under the rigid influence of the state damper mechanism? Free trade laws and administration are two things that are incompatible. In general, Russian officials should stay away from any derivatives of the word “justice”. In any case, in relation to the market exchange rates of the ruble …