The Russian authorities are reportedly discussing the implementation of partial capital control measures in response to the continuous decline of the ruble. Bloomberg has obtained information from four anonymous sources familiar with these discussions.
One of the proposed measures under consideration involves mandating the sale of export revenues. The government and exporters had a meeting on Monday to discuss this proposal, but no breakthrough was reached. Another meeting has been scheduled for later in the week to further address this issue.
The ruble has been facing significant depreciation, reaching a 16-month low against major currencies on Monday. It traded at 101 against the US dollar and 111 against the euro. However, the Russian currency experienced a temporary strengthening after the central bank raised the key interest rate from 8.5% to 12% on Tuesday. Despite this, the ruble later gave up some of its gains.
It is worth noting that last year, in response to the sanctions imposed by the West due to the Ukraine conflict, the Russian authorities implemented strict controls on capital movement. These controls included the mandatory sale of 80% of foreign exchange earnings. Exporters were required to sell their foreign currency credits to authorized banks in amounts determined by a presidential decree.
In an effort to provide exporters with more flexibility in managing their foreign currency liquidity, the Central Bank of Russia later eased the requirement and reduced the mandatory sale of foreign currency to 50%. As further steps towards liberalizing the currency regime, all the restrictions were eventually eliminated.
As of Wednesday, the ruble was trading around 97 against the dollar and 106 against the euro at noon local time in Moscow.
The discussions regarding capital control measures reflect the concerns of Russian authorities over the continued decline of the ruble. With the implementation of such measures, they aim to stabilize the currency and prevent further depreciation. However, it remains to be seen whether these measures will be effective, as capital control measures may have negative implications for foreign investors and the overall economy.
The Russian government and exporters will continue to engage in discussions to find a solution to the ruble’s decline. As the situation unfolds, it will be closely monitored by both domestic and international markets. Any measures taken by the authorities will likely have a significant impact on the Russian economy and its currency.
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