Page 78 - bneIntelliNews monthly country report Russia May 2024

Increasing budget expenditures also heighten risks for the national currency exchange rate. The Finance Ministry supports Russian businesses by providing them with funds for production, which often requires imported components and equipment. This means companies have more capital to purchase foreign currency for such transactions. Russia’s Economic Development Ministry officially predicts that the average exchange rate for this year will hover around 90 rubles to the U.S. dollar. However, SberCIB Investment Research predicts the ruble will weaken to 95 against the dollar by the second quarter, while the Moscow-based investment company Tsifra Broker expects the exchange rate to hit 100 rubles to the dollar by the end of April.
Due to sanctions, Russia struggles to receive billions of dollars in export revenue. The strengthening of American sanctions and the refusal by foreign banks to pay Russian companies have deprived Moscow of billions of dollars in foreign exchange. In March, the Russian Federation earned $39.6B from exports, 30% more than in February and almost 40% more than in January. However, Russian companies' "foreign assets" increased by $15.5B - an indicator that includes funds in foreign accounts. In March, the growth rate in foreign assets accelerated by 400%. "The goods are being exported, but the money is not arriving," says CenterCredit Bank. So, despite the reports from the Russian Central Bank about a record trade surplus for more than a year ($16.7B in March), almost every fourth dollar received for exported goods was suspended in foreign accounts. This may be one of the reasons for the weakness of the ruble at the end of the first quarter.
In December 2023, Russia was paid in yuan for 35.8 percent of its exports, while it paid in yuan for 37 percent of its imports.23 For reference, in the same period, it received ruble payments for 35.7 percent of its exports and paid in rubles for 31.5 percent of its imports. As a consequence, in December 2023, net exports in foreign currency hit $5.4 billion, their highest level since January 2023. The amount held in yuan by Russian companies and individuals totaled $68.7 billion in 2023, slightly more than the $64.7 billion held in dollars.24 As much as $46.1 billion worth of credit in yuan was extended to Russian companies in 2023, a near-quadruple year-on-year increase (largely driven by a conversion of debt from dollars and euros).
Chinese companies go 'underground' on Russia payments. Some Chinese banks Major Chinese are limiting payments for transactions with Russia due to concerns about U.S. sanctions, Reuters reported on April 29, citing unnamed trading and banking sources familiar with the matter.
The share of the euro in international settlements has dropped to a historical minimum—within just one month, the currency lost 1.32% and its share amounted to 21.93%. The dollar and yuan strengthened their positions at the expense of the euro, accounting for 47.37% and 4.69%
78 RUSSIA Country Report May 2024 www.intellinews.com