Russia is hashing out a strategy for countering outflows of capital, with top officials disagreeing over the option of tighter controls as the ruble again comes under pressure to depreciate.
(Bloomberg) — Russia is hashing out a strategy for countering outflows of capital, with top officials disagreeing over the option of tighter controls as the ruble again comes under pressure to depreciate.
Speaking at a central bank event in Moscow on Friday, Governor Elvira Nabiullina said she opposed stiffer restrictions because companies are able to bypass measures such as mandatory currency sales. Finance Minister Anton Siluanov, who advocates a tougher approach, acknowledged the differences but pledged that “we’ll still find a joint solution.”
The lingering split means Russia will likely try to cope without resorting to curbs on the movement of capital that it used last year to stave off the ruble’s collapse after the invasion of Ukraine. The currency’s brief plunge above 100 per dollar late last month revived a debate in Moscow about capital controls, with officials opting for informal measures to ensure enough foreign exchange is available in the domestic market.
Nabiullina said only “mirror” or reciprocal measures imposed in retaliation are warranted. A better option is to ensure ruble assets remain appealing, she said.
“Currency restrictions shouldn’t create difficulties for our economic entities,” she said. “The outflow of capital is a preference for hard currency” and that should be “treated with completely different methods, including the key rate,” she said.
As the ruble came under intense selling pressure, the central bank announced in August that it would refrain from foreign-currency purchases for the rest of this year and then delivered a steep hike in interest rates at an emergency meeting.
But declines have resumed since then. The currency is among the worst performers in emerging markets in 2023, after suffering from a deterioration in foreign trade amid a raft of international sanctions over the Kremlin’s war in Ukraine.
The Bank of Russia, which is next scheduled to review policy in two weeks, is “unlikely” to lower rates during its coming meetings, Nabiullina said. “An increase in the rate, as well as a hold, are possible,” she said.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.