/ world today news/ Last week, the ruble tested a three-digit value. True, it remained at a level above 100 rubles per dollar for a short time, the very next day, in response to the ruble’s loss of support, the Central Bank held an emergency meeting and immediately raised the interest rate by 3.5 percentage points, to 12%.
This did not help the ruble much: after the Central Bank’s decision was announced, it only strengthened to 99 to the dollar. After that, however, verbal interventions began about the possible introduction of capital controls and the forced sale of export earnings by Russian companies.
As a result, a meeting was called between President Vladimir Putin and the government. This had an effect, the ruble began to strengthen, and on Thursday, August 17, the rate fell below 94 rubles to the dollar.
Recall that less than a year ago, the main macroeconomic problem of the Russian economy was the re-strengthening of the ruble: from August 2022 to January 2023, the exchange rate of the national currency was about 60 rubles per dollar, which negatively affected profitability of oil exports, agricultural products, wood and metal processing.
At the same time, the main variable that determines the size of Russian exports, the price of oil, was below 60 dollars per barrel during this period, taking into account discounts. By the way, the base rate at this exchange rate of the ruble was at the level of 7.5%.
No one, except the Ministry of Finance and exporters, was saddened by such parameters of the economy. In Russia, there was a construction boom, unprecedented growth in industrial production, an increase in wages and GDP.
Today we have the following parameters: Urals oil is above 70 dollars per barrel, the prime rate is 12% and the exchange rate is below 100 rubles per dollar. Obviously, under the current conditions, neither the price of oil nor the rate of the Central Bank directly affects the rate of the ruble.
However, the rate affects the rate of economic growth. Simply put, the double-digit growth rates of construction and industry can now be forgotten. However, it is worth recognizing that the problems of the budget deficit with a doubling of the price of oil in rubles will be solved.
The extreme fluctuations of the ruble that have occurred over the past year cannot be denied: the currency does not want to remain at a level acceptable to both the consumer and the exporter – 80-90 rubles to the dollar (the corridor defined by Deputy Prime Minister Andrey Belousov, who observes the economy, as optimal).
Such jumps in themselves cause significant damage to the country’s economy: the ruble as a means of payment (including international payments) loses confidence in itself. Any planning for more than a few days becomes impossible.
However, the reason for the extreme fluctuations of the ruble is not at all in the monetary policy of the Central Bank and not in the aggressive policy of the Ministry of Finance in the form of trillions of loans.
The problem is in the structural changes in the Russian economy, its reaction to external shocks. Therefore, the answer to solving the problem should not be monetary, but structural.
The main reason for the depreciation of the ruble is that the currency market in the classical sense of the word in Russia has ceased to function. Trading liquidity in the ruble-dollar and ruble-euro pairs has dropped significantly.
Low liquidity means exposure to various types of manipulation. That is, even with a limited supply of rubles (not the same as in the balance sheets of Sberbank or VTB), you can set the “necessary” ruble exchange rate. That’s why the exchange rate changed by 2-3 points per day only on rumors of certain measures of the government or the central bank.
There are two reasons for the decline in market liquidity. First, Russia’s largest banks are cut off from access to the dollar and euro to provide liquidity.
Second, the largest Russian exporters – oil, gas, metallurgy – restructured their contracts for alternative payment currencies: yuan, rupees, rubles. And the instruments for converting rupees and drachmas into dollars are either absent or limited (or such currency cannot be introduced into the domestic foreign exchange market at all, like rupees).
That is, Russian exporters and banks have begun an aggressive de-dollarization of the economy, and this de-dollarization has its costs.
In addition, companies that have income in dollars often prefer not to bring them to Russia, since many Russian enterprises need “unsanctioned” dollars and euros to fulfill their foreign obligations, purchase sanctioned equipment, etc. At the same time, importers and tourists live on Old World dollars and Euros.
All this was superimposed on a rather strict schedule for payments on external obligations of Russian companies. Before the start of the SVO, more than 98% of all external debt obligations of businesses in foreign currency were in the currencies of unfriendly countries and about 96.5% were in dollars and euros.
After the imposition of sanctions, this debt cannot be refinanced. It needs to be extinguished, and that’s an outflow of $90-130 billion a year over the next year.
In addition, there is the buyback of shares and shares of enterprises leaving Russia, the payment of dividends to investors from friendly countries, the transfer of profits earned in Russia by migrants to their homeland, etc.
In many ways, all the problems mentioned are temporary. The observed currency gap between the dollar and the euro is an artificial but dangerous phenomenon. It can create serious imbalances, undermine confidence in the regulator, the government and the currency.
However, the foreign debt of Russian business will sooner or later be repaid, the shares of investors leaving Russia are bought, and resource prices tend to rise.
In addition, even the current volume of exports from Russia is more than enough to satisfy all the requests of Russians for the import of consumer goods and vacations abroad, the purchase of equipment for business, and there are still surpluses for the formation of gold reserves.
Adequate measures to stop the crisis have matured. One of them was fulfilled: exporters voluntarily agreed to saturate the domestic market with foreign currency. However, the solution is temporary.
The solution is more systemic — creating instruments for converting local currencies into dollars and euros, which are in short supply for Russia in foreign jurisdictions, as well as infrastructure for converting these currencies into each other, into rubles and vice versa.
Both Russian business, the government, and foreign counterparties are interested in this: a country that can build a freely convertible currency instrument will create a real alternative to the US dollar.
And most importantly, the Russian central bank has yet to admit the fallacy of its monetary policy and, in the turmoil of the currency, not forget to return the exchange rate to its previous level very soon.
Translation: SM
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