Russian finance minister: rouble overvalued by 10-12%

Russian Finance Minister Anton Siluanov said that the rouble is overvalued by up to 12%, making it a good time for foreign currency purchases under which the ministry may buy at least $1 billion in 2017.

"I believe it (the ruble) is 10-12 percent stronger than its fundamental value," TASS cited Siluanov as telling journalists on the sidelines of the G20 meeting in Baden-Baden, Germany.

A professor at the department of the stock market and investments at the Higher School of Economics, Alexander Abramov, speaking to Vestnik Kavkaza, shared the opinion that the ruble is currently overvalued.

Speaking about the link to the actions of the Finance Ministry, the expert explained that the main issue here is whether the Ministry of Finance buys currency on the market or from the Central Bank. "If the Ministry of Finance buys currency on the market, the ruble will weaken, and if it does the same through the Central Bank, it is not accompanied by the arrival of new rubles on the market, such operations will have no influence on the ruble," the economist specified.

According to him, the Ministry of Finance usually operates under the second scenario. "Then Siluanov's words mean that either he is mistaken or the Ministry of Finance is going to start buying dollars on the market, which will weaken the ruble a little," the professor at the department of the stock market and investments at the Higher School of Economics pointed out.

Abramov added that the intervention of the Ministry of Finance and the Central Bank will not be enough in order to lower the ruble to 65-66 rubles per dollar, it may decline the exchange rate by only 1-2 rubles. "The situation can be changed by either the growing oil prices, or serious outflows of capital," the expert said.

According to him, a decline in the key rate, which remains at the level of 10%,  will be able to weaken the ruble more significantly, in the case of 2-2.5 trillion rubles of excess liquidity, which are kept on correspondent accounts.

Professor of the RANEPA faculty of Finance, Money Circulation and Credit, Yuri Yudenkov, in turn, noted that the true price of the ruble is determined by the market. As for the position of the Ministry of Finance, the expert recalled how a month ago the ministry reported that it prefers a strong ruble. Thus, Anton Siluanov's assessment reflects the requirements that the ruble must meet in order to fulfill the budget obligations.

"In addition, Russia benefits from a strong ruble, if the economy is focused on imports, for example, of new technologies, new equipment, etc. The weak ruble is profitable for exporters. We have a commodity economy, and oil sales abroad provide us budget revenues," the expert recalled.

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