In a bid to support the rouble and combat capital outflows, the Russian government has decided to relax the mandatory sales of foreign currency for exporters. The new decree, signed by President Vladimir Putin in October, states that exporters will not be required to sell a certain percentage of their foreign currency earnings if more than half of their contract values are paid in roubles. This move comes as a response to the rouble coming under pressure from capital outflows and limited foreign currency supply.
The capital controls measures, which were initially introduced affecting companies in the fuel, energy, metal, chemical, timber, and grain industries, have been a point of contention between the government and the central bank. The controls required certain exporters to deposit 80% of their foreign currency earnings in Russian banks and sell at least 90% of those proceeds on the domestic market within a two-week period. However, with the recent changes, these requirements have been relaxed for exporters who meet the new criteria.
The central bank has expressed doubts over the effectiveness of these capital controls, citing high interest rates and strong export revenues as more impactful in supporting the rouble. This disagreement with the government’s approach to stabilizing the foreign exchange market has been ongoing, with the central bank questioning the long-term benefits of the controls. Despite the government’s argument that the controls reduce rouble depreciation risk, the central bank remains skeptical of their overall impact.
Following the announcement of the changes in the government decree, the rouble has seen some stability in its exchange rate against the dollar. Previously, the rouble had tumbled past the 100 mark against the dollar, prompting authorities to take action to regain control of the market. With the rouble now trading near 90 to the dollar, the impact of the new requirements on exporters remains to be seen. The government’s efforts to support the rouble through these changes may have a significant impact on the currency’s performance in the coming months.
The Russian government’s decision to ease foreign currency sales requirements for exporters reflects their efforts to stabilize the rouble amidst capital outflows and limited foreign currency supply. While the central bank remains skeptical of the effectiveness of these measures, the government believes that these changes will help reduce the risk of rouble depreciation. As the situation continues to evolve, it will be interesting to see how these changes impact the rouble and the overall foreign exchange market in Russia.
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