Page 83 - RusRPTSept23

The ruble fell to RUB100 to the dollar on August 14, sparking a mini crisis of confidence that forced CBR governor Elvia Nabiullina to hold an emergency meeting and hike rates 350bp to 12%.
It took a few days but the ruble rallied and was trading at RUB94 to the dollar by August 18. The currency was help after the financial elite met with leading Russian corporate and encouraged them to exchange dollars that acted as an informal intervention and rallied the ruble.
The authorities had been contemplating introduce formal capital controls and reintroducing the mandatory 80-90% foreign exchange surrender requirement, but as is often the case, Nabiullina and Russian Finance Minister Anton Siluanov found a temporary solution that did the trick without resorting to CBR interventions on the exchange markets and so burn up precious international reserves.
It remains to be seen if the quick fix will stick, but economists say the fall of the ruble was due to a shrinking current account surplus due to the new oil sanctions introduced on February 5. That forced Russia to reroute oil from Europe to Asia, a round trip that takes four months, and a hole in the revenues while that route was being established.
However, Siluanov has been adamant that oil revenues will pick up in the second half of the year as this new route begins to work. In this case the current account should begin to grow again and the pressure on the ruble will ease. In that case the temporary fix will be sufficient.
Despite the limited nature of this currency crisis and Nabiullina’s firm action, significant damage has been done to the economy that has been set by about a year. Inflation has been rising due to the steady depreciation of the ruble since the start of this year, but was supposed to peak at around 6% at the end of 2023 before falling to the target rate of 4% in the first half of this year.
Analyst are now predicting that inflation could rise to around 7.5% this year and it will take until 2025 until the inflation rate falls back to 4%.
In August, the ruble's exchange rate has been at its weakest since spring 2022. This week, the ruble's official dollar exchange rate was over 100 rubles. Compared to August of last year, the exchange rate of the ruble has been about 40% weaker.
In order to curb the inflationary pressures caused by the sharp weakening of the ruble and domestic supply constraints, the Central Bank of Russia raised its key interest rate by 3.5 percentage points in the extra 15.8. in its held meeting. The interest rate is now 12%. According to media reports, there have also been discussions in Russia about reintroducing restrictions on various
RUSSIA Country Report September 2023 www.intellinews.com