Vladimir Putin signed a decree on Wednesday “On the implementation of compulsory sale of proceeds in foreign currency received by individual Russian exporters under foreign trade agreements (contracts).” In this respect reported Government of the Russian Federation.
The decree affects 43 Russian export groups belonging to the fuel and energy complex, ferrous and non-ferrous metallurgy, forestry and chemical industries, and grain production. The document includes “a specific list of exporters.” However, the names of the companies have not been disclosed yet.
According to the decree, individual companies are required to repatriate (return to Russia – socialbites.ca) within six months and sell their foreign exchange earnings in the country. Volumes and deadlines must be determined by the government of the Russian Federation within 24 hours from the moment the decree is signed.
Individual companies were required to submit to the Central Bank of the Russian Federation and Rosfinmonitoring indicative plans and programs for buying and selling foreign currency on the Russian market.
Authorized representatives of financial intelligence are introduced to individual companies. Representatives will monitor and ensure compliance with currency regulatory rules.
Russian Deputy Prime Minister Andrei Belousov said, “Such measures are needed” to increase the transparency and predictability of the foreign exchange market, reduce the opportunity for foreign exchange speculation. He expressed hope that the decision will not be “burdensome for real market participants.”
Elvira Nabiullina, head of the Central Bank of the Russian Federation, has repeatedly stated that there is no need for mandatory repatriation of foreign currency earnings. According to the regulator, the share of revenues of Russian exporters from foreign currency sales is more than 80%, Izvestia newspaper reported in August. However, on Thursday the Central Bank supported the compulsory sale of foreign exchange earnings of some exporters. This can contribute to reducing short-term volatility in the foreign exchange market, the regulator’s press service emphasized. answer To a request from Interfax. At the same time, Bank of Russia experts explained that the targeted nature of the restrictions will make it possible to preserve the developed plans of foreign trade agreements for the majority of participants in foreign trade activities.
How did this situation affect the ruble?
In response to the news of the introduction of mandatory sales of foreign exchange earnings, the ruble rate strengthened in the evening session to 97.7 rubles per dollar and continued to strengthen in the morning hours. As of 11:10 a.m. Thursday, the ruble had strengthened 3 percent, or 3 rubles, against the dollar; The dollar exchange rate dropped from 100 rubles to 97 rubles per dollar. The euro exchange rate fell from 106 to 103 rubles, and the yuan fell from 13.7 to 13.3 rubles. At the time of writing, the dollar is traded at 97.05 rubles, the euro at 103.085 rubles and the yuan at 13.295 rubles.
“Trade volumes have increased, which probably means that foreign exchange is being sold by both exporters and financial speculators in the expectation that exporters will sell foreign currency in the next six months,” commented Sovcombank chief analyst Mikhail Vasiliev.
BCS Forex analyst Anatoly Trifonov says that although the exact parameters of the new law are unknown, this strengthening is premature.
Why won’t there be a dollar in 60 rubles?
Trifonov emphasized that the situation on the foreign exchange market is radically different now and in the spring of 2022, when the compulsory sale of foreign currency proceeds was last implemented.
“Due to a sharp contraction in imports under the influence of sanctions, high export volumes supported by rising energy prices and the introduction of strict limits on money and bank transfers, limiting outflows from the current account, the ruble was strengthened to 60 rubles per dollar. ,” he explained.
Vasiliev explained that, unlike in the spring of 2022, there were no other effective measures to support the ruble at that time. In the spring of 2022, authorities almost completely limited capital outflow and the Bank of Russia increased the key rate to 20%. As a result, he said, both citizens and the business world flocked to ruble assets such as deposits and bonds due to the contraction in imports.
The analyst added that now Russian importers have established channels for the supply of goods, and many restrictions on capital outflow have been relaxed or removed compared to spring 2022.
Therefore, Trifonov concluded that even if exporters sold 80 percent of their foreign exchange earnings, the strengthening of the ruble would not be as sharp as last year.
According to Vasiliev, Russian authorities are solving the problem of foreign exchange supply on the market, which caused the weakening of the ruble in the last ten months.
“Last week, the Russian President once again reminded that the problem is that exporters’ foreign exchange earnings do not return. At the WEF in early September, the president reported that officials were seeing “a limited return of foreign exchange earnings” from the largest exporters. Therefore, the authorities will hold talks with the business community to increase the supply of foreign currency to stabilize the ruble exchange rate, but this will be done without “cool moves” in the field of exchange control measures, Vasilyev said.
What will be the new year’s course?
Trifonov expects the ruble exchange rate to rise to 94.1 rubles per dollar by the end of the year. However, he explained that this estimate could be revised if the exact parameters of capital control measures turn out to be tighter than the assumptions.
According to Vasilyev, the authorities are currently solving the issue of stabilizing the exchange rate and trying to prevent the consolidation of the exchange rate above the level of 100 rubles per dollar. Therefore, the analyst expects the ruble/dollar exchange rate to remain in the range of 90-100 rubles until the end of the year. Its forecasts for the fourth quarter currently include an average exchange rate of 98 rubles for the dollar, 104 rubles for the euro and 13.4 rubles for the yuan. It also allows for review of the assessment.
“The risk remains that exporters will have the opportunity to buy back their foreign exchange earnings from the market after selling them. In this case, there will be no impact on the ruble exchange rate. “Unlike previous periods when foreign exchange controls were tightened, it is important not to interfere with the work of Russian enterprises, which are now building complex supply chains for exports and imports under Western sanctions,” Vasiliev emphasized.
The analyst therefore concluded that this time around this decree will likely be implemented more manually in order to preserve export revenues and ensure the supply of necessary imports.
Grigory Zhirnov, head of analytical and corporate affairs of DOM.RF Bank, did not rule out strengthening the exchange rate to 90 rubles per dollar.
“The measures taken may support the Russian currency in the remaining months of the year, especially in the face of rising oil prices. The average price of Russian Ural oil in September increased from 50-60 dollars in the first half of the year to 83 dollars. “In addition, in the first or second quarter of next year, the ruble will begin to receive additional support from tightening monetary policy,” he said.
Candidate of Economic Sciences, Associate Professor at the Department of Global Financial Markets and Fintech at the Russian University of Economics. GV Plekhanov Denis Perepelitsa suggested that the ruble rate will most likely remain in the range of 92-95 rubles per dollar.
“The 2024 budget was prepared on the basis of an exchange rate of 92 rubles per dollar. Any further strengthening of the national currency will lead to a budget deficit, and this is exactly what the government is trying to avoid. “Therefore, in fact, this decree gives the government the right to regulate the volume and timing of sales of foreign currency earnings within the necessary limits in order to prevent the depreciation of the ruble,” he explained.