Will Russia face currency shortage?
On Monday the price of Brent crude oil rose to $54.09 per barrel, after the publication of data on a decrease in oil production in the US and OPEC’s statement that it was ready to discuss falling prices, RBK reported. Against the background of a rise in oil prices, the ruble strengthened on the Moscow currency exchange. At 10:50 p.m. on Monday, $1 cost 64.2 rubles, 1 euro cost 72.1 rubles. However, experts don’t rule out that the ruble may fall again.
Dmitry Piskulov, chairman of the National Foreign Exchange Association, speaking about the factors which influenced the ruble’s fall, said: “In recent years, Russian exports have largely consisted of energy exports. Falling oil prices reduce the amount of currency to the country and create a lack of supply of foreign currency on the foreign exchange market. In case of any fall in oil prices, banks and corporations open long dollar positions. They buy dollars with a premonition of their deficiency. One of the major long-term obstacles to the growth of the ruble is the reduction of the Russian economy for a variety of reasons, which have been stated many times, due to the inefficiency of the external economy, in connection with the western sanctions, as well as due to the fact that we have no proper investment climate.”
According to the expert, there was a 4.6% decline in GDP in the second quarter, and according to official information it is planned that the outflow of capital from Russia will be about $90 billion this year.
Commenting on the situation in the Chinese economy, Piskulov said: “We can see a hard slump in the economy after a decade of high economic growth. We see a sharp drop in the stock index, as well as China’s desire to soften this slump and the tempo of slowdown in the economy. The high debt load of enterprises and the population is like in 1929 in the United States, although they had other reasons. Accordingly, the official devaluation of the Chinese yuan is from 6 to 8 yuans per dollar. Of course, the countries which surround China are also experiencing this pressure. The exchange rate was reduced in Russia and in China, which is why Kazakhstan did the same.”
At the same time, the expert says that the regime of the exchange rate is a free ‘floating’ of the Russian ruble, i.e. the Central Bank doesn’t interfere in these processes: “It bought foreign currencies from May to the end of July amounting to $10 billion of foreign exchange reserves. The ruble strengthened but then halted. In principle, the last major intervention of the Central Bank on the foreign exchange market was at the beginning of this year and at the end of last year. And the Bank of Russia continues to adhere to a policy of non-interference in rate fixing officially."
Piskulov doesn’t rule out that Russia is likely to face a currency shortage soon, and the consequent introduction of foreign exchange restrictions on the movement of capital and restrictions in respect of currency speculators: “We need pre-notifying restrictions or the freezing of funds for some time. Now these measures are contrary to the accepted obligations in Russia under the statute of the IMF on a freely convertible currency, which involves the absence of exchange restrictions in respect of current and capital operations. Therefore, it is important to ensure an investment regime in Russia. Despite sanctions, international cooperation is still continuing. Some foreign investors are investing in Russia.”