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see financial stability risks in the expensive ruble. And last week, at a briefing after another rate cut by the Central Bank, she recalled that the strengthening of the ruble contributed to lower inflation, and “I think it is beneficial for all citizens.”
In addition to an emergency interest rate hike to 20% on February 28, several factors contributed to the quick recovery of the ruble:
(1) The CBR introduced strict capital controls, ordering banks not to sell foreign currency to retail clients until September and introducing a $10,000 cap on cash withdrawals from FX denominated retail accounts. However, supplies of foreign currency are extremely limited, making withdrawals, even under the cap, sometimes impossible. Essentially, only swap transactions with residents remained before the provision of these data were discontinued.
(2) The central bank now requires exporters to convert 50% of their revenue into rubles (in the immediate aftermath of the imposition of sanctions, the mandated share had been 80%). To the extent that foreign importers of Russian natural gas adhere to the demand to pay for deliveries in rubles, this will increase the share of converted revenues to 100%.
(3) High commodity prices have had a positive effect on FX inflows for goods exports, in particular, energy exports. Russia’s current account surplus reached $58.2bn in the first quarter of 2022, the highest on record and almost 50% of the full-year 2021 number. April set another record at $37.6bn.
The Eurasia Economic Union (EUU) countries need to make more use of their own currencies to settle trade deals within the union, Russian Prime Minister Mikhail Mishustin said at a meeting of the Eurasian Intergovernmental Council on June 21.
"Work should be continued to set up conditions for the normal functioning of business in the current situation. This is why the rules for a unified customs, customs-tariff, non-tariff, and technical regulation are being adjusted. We propose to accelerate transitioning to our own international financial settlement mechanisms, expanding the practice of using national currencies in foreign trade operations between us and with the countries that have proven themselves to be reliable partners," Mishustin said, as cited by Tass.
He also said that food security was currently a top priority. "The states of the union are fully self-sufficient in key types of food and agricultural products. At the same time, we will continue to protect the interests of our producers, boost import substitution, and create a common market in the agro-industrial complex," the Russian Prime Minister said.
101 RUSSIA Country Report October 2020 www.intellinews.com