Starting October 16, 2023, Russian exporters were required to credit at least 80 percent of their foreign currency receipts to accounts in domestic banks and to sell at least 90 percent of those proceeds on the domestic market. The regime applied to 43 company groups and remained in force through April 30, 2024.
Pros and cons of the extension
The ministry of finance press service indicated that the measure proved its effectiveness and supported extending it. It noted that the policy helped stabilize the domestic foreign exchange market. If exporters encounter difficulties in refunds, the ministry will assess and finalize the revenue refund plan to ensure smoother processing. This reflects a governmental aim to maintain orderly markets as part of broader macroeconomic management.
The central bank press service stated that there are no compelling reasons to extend the mandatory sale of foreign currency earnings. The Bank of Russia observed that the impact of this measure on the currency market has been moderate relative to the influence of ongoing monetary policy, including the key rate currently around 16 percent. This assessment emphasizes the central bank’s preference to rely on its policy toolkit rather than extended forced sales.
Additionally, the growth in export values, which reached the foreign exchange market with some delay relative to mid-2023 lows, contributed to stabilizing conditions. These dynamics were tied to the timing of foreign trade agreements and the broader external environment.
“We will reject it in the future”
During August–September 2023 the ruble weakened notably, raising concerns among businesses and households. After the presidential decree, the ruble appreciated against the dollar by more than 13 percent in October. The stabilization was aided by the Bank of Russia’s decision to raise the interest rate. The perspective shared was that a stable and predictable exchange rate supports economic development, foreign trade growth, and investment attraction.
With sanctions freezing the central bank reserves in euros and dollars, there is no availability to directly dampen volatility through those assets. Temporary measures are seen as essential for stability, and extending the obligation for key exporters to sell foreign currency through the end of 2024 is viewed as a component of macroeconomic stability. The advance notice of the decision was noted, and there is an expectation that forced sales could be rolled back in the future as conditions allow. This stance was echoed by governmental leaders in public remarks.
Analysts have highlighted that the mandatory refund and sale thresholds can shift based on commodity prices, exchange rate movements, and macroeconomic parameters. Some scenarios include the possibility of softening the selling requirement from 90 percent toward a 50–70 percent range, depending on market conditions.
What will happen to the ruble exchange rate?
Industry observers suggested that extending the measure could reduce ruble volatility, though the overall impact on the exchange rate might be limited. The extension is seen as shaping market expectations rather than dramatically altering the macro picture. If the policy persists, a smoother trajectory for the ruble is anticipated by many analysts.
Other experts noted that a range of factors will continue to influence the ruble, including speculation about future movements in the dollar and euro. Some foresee a stabilization in the early part of 2024, with possible consolidation within certain ruble bands. The central bank’s higher interest rate remains a key driver of currency dynamics, alongside trade and fiscal considerations.
Technical analyses suggested caps for currency strength and potential steps for policy adjustments. If extensions persist, the ruble could approach upper bounds in scenarios where inflation trends align with policy expectations. Such outcomes would benefit domestic businesses and consumers by supporting price stability and predictable financial planning.
Experts also noted that if commodity prices improve and the ruble strengthens, temporary controls could be eased. This would occur while monitoring overall macroeconomic health and ensuring that any relief measures align with broader fiscal strategy.
Should I buy foreign currency?
Several economists recommend caution with foreign currencies. The view is that ruble assets can offer robust protection against inflation when interest rates on ruble deposits are favorable. In conditions of relative exchange-rate stability, foreign currencies may pose greater risk without corresponding yield advantages.
One expert advised buying dollars or euros only when there is a clear international travel need and to keep funds in fixed-term ruble deposits until that time. This guidance reflects a conservative approach aimed at safeguarding savings while navigating currency exposure in the near term.