Citing a Russian finance ministry proposal, the Financial Times said large exporters could be forced to convert up to 80% of their foreign currency into roubles in order to raise demand for the currency.
Other proposals included a ban on foreign dividend payments and loan extensions, cancelling import subsidies, limiting currency swaps, and reducing the amount of foreign currency exporters can take out of Russia, the newspaper reported.
The rouble fell below the barrier of 100 to the dollar this week, prompting the central bank to call an emergency meeting to raise interest rates for the first time since shortly after Russia’s full-scale invasion of Ukraine. The key rate was increased from 8.5% to 12%.
The reintroduction of capital controls would mean the return of the strictest Kremlin measures to protect the value of the rouble since just after the invasion began in February 2022.
Russian media have not reported on details of the proposal, but Bloomberg on Tuesday reported that discussions of reintroducing capital controls had already been held in a meeting between the government and exporters the previous day. No breakthrough was reached, Bloomberg said, and the talks were expected to continue on Wednesday.
Russia introduced similar capital controls shortly after western sanctions and a financial backlash caused the rouble to fall as low as 150 to the dollar. It began to ease capital controls in May last year once the rouble had strengthened and the Kremlin appeared to have averted the danger of imminent economic collapse.
However, this year the rouble has been among the three worst performing currencies in developing economies, losing 26% of its value and going above the psychologically important barrier of 100 to the dollar.
Analysts said the Russian central bank’s interest rate rise on Tuesday would temporarily strengthen the rouble but would fail to address the underlying pressures from sanctions and economic isolation.
The weak rouble has helped the Kremlin to stretch its budget, much of which comes in foreign currency from energy exports, in order to pay for its war in Ukraine and to maintain public spending.
But the slide in the value of the Russian currency appears to have scared senior officials. This week, Maxim Oreshkin, an economist and a former minister in Russia’s finance ministry, criticised the central bank’s monetary policy, writing that the exchange rate had “deviated significantly from fundamental levels” and its “normalisation” was expected in the near future”.
“It is in the interests of the Russian economy to have a strong rouble,” he wrote in an op-ed for the Tass news agency.
Source: theguardian
Author: Andrew Roth
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