Page 9 - RusRPTNov23

2.0 Politics
2.1 Putin reimposes currency controls to bring down
inflation, strengthen ruble ahead of 2024 elections
Russia's President Vladimir Putin has once again imposed currency controls by decree on October 11, marking the second instance in less than a year. These measures, in effect for six months, are purportedly aimed at curbing inflation. However, they not only challenge the independence of the Central Bank but also push Russia further from having a fully convertible ruble.
The decree issued by the Kremlin mandates that 43 companies, operating in various sectors such as metals, grain, forestry, chemicals, and energy, repatriate and sell foreign currency on the Russian market within six months. The precise volumes and timelines are to be determined by the government. Furthermore, it obliges select companies to report their foreign currency purchase plans and the sale of foreign earnings to both the Central Bank and the financial monitoring agency Rosfinmonitoring. In certain cases, representatives from Rosfinmonitoring will oversee the sale of reserves to ensure compliance.
Despite these measures, many specifics, including the names of the affected companies, have not been disclosed, and the full text of the decree remains unpublished.
The next day Central Bank head Elvira Nabiullina, in a reversal of her previous stance against currency controls, described the new measures as a temporary and flexible solution that would not adversely affect small businesses or larger firms with limited foreign currency earnings. The Russian government asserts that the decree will stabilise the ruble, providing a predictable exchange rate.
This marks the second instance of Russia implementing currency controls since the full-scale invasion of Ukraine last year. The previous imposition occurred four days after Russia's invasion, when a currency crisis unfolded. Exporters were mandated to sell at least 80% of their foreign currency revenue domestically. However, three months later, this requirement was lowered to 50%, and within another month, it was completely abolished.
This time, the six-month duration of the decree suggests that the goal is to reduce inflation before the upcoming presidential election, scheduled for early next year. This strategy aims to avoid further increases in interest rates by the Central Bank.
The ruble, which recently dropped to RUB102 against the dollar, rebounded following the announcement of currency controls and was trading at slightly over RUB97.
9 RUSSIA Country Report November 2023 www.intellinews.com