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“It is in the interests of the Russian economy to have a strong rouble.”
Earlier on Monday, the central bank repeated that it currently doesn’t see any threats to financial stability from the rouble’s performance and allows for the possibility of raising interest rates at its coming meetings.
The rouble is one of the worst-performing currencies this year.Credit: Reuters
The value of exports is facing a “significant reduction” at a time when demand for imports is on the rise against the background of elevated government spending and also as a result of fast lending growth, it said in a statement.
The public airing of grievances hints at discord in the highest echelons of the Russian establishment over how to respond to a crash in the rouble that pulled it to levels last seen weeks after the invasion of Ukraine in February 2022.
The central bank announced last week it wouldn’t buy foreign currency on the domestic market under a budgetary mechanism that was put in place to insulate the economy from swings in commodity prices. The decision aimed to “reduce the volatility of financial markets,” it said.
“The weakening of the rouble is the result of the international screws tightening around the Russian economy, but also the cost of keeping the economy going.”
Erik Meyersson, chief emerging-market strategist at SEB AB in Stockholm.
The suspension of foreign-exchange purchases “has failed to stabilise the currency,” according to JPMorgan Chase & Co., which now expects the central bank to raise its benchmark to 10 per cent by the end of the year, up from its previous call for 9 per cent.
The central bank continues to adhere to a floating exchange-rate policy that “allows the economy to adapt effectively to changing external conditions,” Deputy Governor Alexey Zabotkin told reporters on Friday.
Budget situation
But in what amounted to a defence of government policies, Oreshkin said authorities “managed to stabilise the budget situation” and expect to run a surplus in the third quarter, with the year-end deficit seen in line with the planned 2 per cent of gross domestic product.
In the remainder of the year, the amount of extra proceeds from oil and gas sales will reach about 800 billion roubles ($12.5 billion) above a baseline level in the budget, allowing the government to rely less on its wealth fund to cover the fiscal deficit, he said.
Bank of Russia Governor Elvira Nabiullina has repeatedly cited deterioration in trade as the main reason for the rouble’s weakness but she has been criticised by the Kremlin.Credit: Bloomberg
Revenues of Russian oil and gas exporters declined to $US6.9 billion ($10.6 billion) in July from $US16.8 billion in the same period last year, according to the latest central bank data. An easing of restrictions on moving money abroad has also led to accelerated capital flight as Russians race to shift funds into foreign accounts.
“The weakening of the rouble is the result of the international screws tightening around the Russian economy, but also the cost of keeping the economy going,” said Erik Meyersson, chief emerging-market strategist at SEB AB in Stockholm.
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“Nobody wants to hold roubles, and the limited supply of foreign exchange from exporters weighs on the currency.”
Bloomberg
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