«This makes the ruble exchange rate more market-friendly»
The norm obliging large exporters to credit at least 60% of foreign currency earnings to their bank accounts in Russia has been relaxed to 40%. According to analysts, this is mainly due to the authorities' intention to prevent further strengthening of the ruble. The current exchange rate frankly does not suit the Ministry of Finance, since it does not allow replenishing the treasury in the volumes previously planned by the department.
The decision was made “taking into account the stabilization of the national currency exchange rate and the achievement of a sufficient level of foreign exchange liquidity,” the Cabinet of Ministers said in a statement. The measure will be in force until April 30, 2025. The previous time the threshold was lowered less than a month ago — on June 20: from the original 80% to 60%. The requirement for exporters was introduced by presidential decree in October 2023 to ensure the stability of the Russian financial market. On October 10, the dollar exchange rate exceeded 101, and overall for the year it strengthened by 30% — a record value for nine years. The reasons were increased capital outflow from the country, a prolonged period of low interest rates, negative dynamics of oil exports and an increase in imports.
The rule affected 43 groups of companies related to ferrous and non-ferrous metallurgy, grain farming, chemical and forestry industries, as well as fuel and energy sectors. Their names were not disclosed. The Central Bank of the Russian Federation was skeptical about the legality of introducing the measure, considering it, firstly, ineffective, and secondly, complicating international payments. According to the regulator's estimates, the exchange rate is influenced to a greater extent by the level of the key rate and the value of export volumes.
“The decision to lower the threshold from 60% to 40% seems quite controversial and contradictory: it has both advantages and obvious risks,” says Artem Deev, head of the analytical department at AMarkets. – On the one hand, it makes exports more attractive for Russian companies, which is especially important under sanctions. The ability to freely dispose of most of the foreign exchange earnings will allow them to optimize operations, reduce costs, increase profits and the volume of foreign currency entering the country, and invest in the development of their own production and R&D. Finally, this leads to a weakening of the ruble, which makes it easier for the Ministry of Finance to fill the budget.”
At the same time, Deev notes, the positive effect may be offset by rising inflation and rising prices for imported goods, which will have a bad impact on consumer demand and as a result — at the rate of overall economic growth.
«The previous reduction of the standard from 80% to 60% had a far from the effect on the situation that the authorities had expected: the ruble remained quite strong,» says Igor Nikolaev, chief researcher at the Institute of Economics of the Russian Academy of Sciences. «Let me remind you that the scenario conditions for the development of the Russian economy, published at the end of April, stipulated an average annual dollar exchange rate of 94.7. And now the «American» costs 87.7, which is clearly not enough to form the revenue side of the budget and fulfill the previously planned plan. It is necessary that export receipts to the treasury in ruble equivalent be larger.»
Additional problems are created by the transition to trading in national currencies with friendly countries, whose markets are a priori less developed compared to Western ones, and whose currencies (in addition to their high volatility) are inconvertible or limitedly convertible. In addition, Nikolaev notes, payments in national currencies are complicated by an imbalance in trade, in particular with India, with which we have a pronounced surplus.
“The decision is justified because it makes the exchange rate more marketable,” says Alexey Vedev, director of the Center for Structural Research at RANEPA. – It is also connected with the fact that the government declares a policy of stimulating imports, which have fallen unjustifiably: in the first half of 2024, supplies from a number of countries fell by 30%. Carrying out settlements with counterparties has become significantly more complicated due to the risk of secondary sanctions, which was also recognized by the head of the Central Bank, Elvira Nabiullina. Now it will be easier for Russian companies to pay for imports by doing it directly abroad — due to the larger amount of foreign currency earnings located there.”