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The government supported the extension of the decree on the mandatory sale of foreign currency earnings by exporters until the end of this year. The main goal, according to First Deputy Prime Minister Andrei Belousov, is to stabilize the situation within the foreign exchange market. The measure will help cover the foreign currency shortage faced by importers. Previously, the mandatory sale of foreign currency earnings was introduced in December 2023. The temporary measure is valid until April 30, 2024 and applies to 43 largest exporters from the energy, metallurgy, chemical, forestry and agricultural sectors. Details and expert opinions are in the Izvestia article.

Expected turn

Finam Financial Group analyst Nikolai Dudchenko assesses the likelihood of extending the decree, which is currently in force until May 1, as high.

— In general, the news is positive for the ruble exchange rate and reduces the likelihood of force majeure in the foreign exchange market, when several large participants gain control over the exchange rate. At the same time, the Ministry of Finance will have control over the exchange rate by setting the percentage of revenue that exporters will be required to sell on the market.

In the expert’s opinion, the further dynamics of the ruble will largely continue to depend on prices for Russian oil grades.

In October-December last year, the decree made it possible to increase sales of foreign currency earnings by exporters who were not previously subject to regulation, which led to the strengthening of the ruble exchange rate from 100 rubles per dollar and 110 rubles per euro to 88 and 95 rubles per unit of each currency, respectively, the expert recalls Institute "Development Center" National Research University Higher School of Economics Igor Safonov. In his opinion, administrative measures brought the greatest effect in this case, and the increase in the key rate, which increased the attractiveness of savings in rubles, acted as an additional factor:

— Despite the fact that the decision did indeed reduce volatility in the foreign exchange market and somewhat strengthen the ruble exchange rate, we do not expect that it will have a significant impact on the decision on the key rate. The current rate of price growth is still quite high, says Safonov.

Possible effect

The decision on mandatory repatriation and sale of part of foreign exchange earnings by large exporters was initially justified in order to increase the supply of foreign currency in the domestic market and stabilize the ruble exchange rate. Despite the fact that the measure is declared as temporary, nothing prevents it from extending its validity over some reasonable horizon, says Dmitry Kulikov, director of the ACRA group of sovereign and regional ratings.

“At the same time, it is possible that the criteria by which companies are included in the list, the applied shares and other parameters may change,” he says. — Short-term exchange rate fluctuations are possible when the measure is adjusted and cancelled.

While the decree is in effect in its current form, fluctuations in the ruble exchange rate are explained by other factors, clarifies an expert from ACRA.

By and large, the Central Bank of the Russian Federation has no choice but to extend the obligation of exporters to sell proceeds; these are forced actions, says Deputy Director of the Banking Institute for Development Yulia Makarenko.

— Despite the obvious predictability of the step, this is not the most effective measure in the fight against currency volatility, since the effect from the sale of foreign currency earnings is rather temporary, even situational. To be able to import goods, you need to sell goods. It turns out, as in the famous cartoon: “To sell something unnecessary, you must first buy something unnecessary, but we don’t have money,” Makarenko noted.

According to the financier, a short-term measure can only delay the inevitable and this period must be used to come up with something truly effective.

— I would like the Bank of Russia to propose effective measures. We sold a little foreign currency, strengthened the ruble and that’s good, but as far as fundamental factors are concerned, we have nothing to offer,” Yulia Makarenko concluded.

An unambiguous signal

The government is making it clear that it will fight for the stability of the ruble exchange rate in dollars and euros, says Alexander Abramov, head of the laboratory for analysis of institutions and financial markets at the Institute of Applied Economic Research at RANEPA.

“We shouldn’t forget about the budget rule, which from this year will work as before: when the price of oil is low, the state begins to sell currency from the National Welfare Fund to maintain the exchange rate and receive rubles to finance budget expenses,” he reminds.

From his point of view, these measures will generally be sufficient for a more or less stable exchange rate. According to the expert, in the coming months the dollar exchange rate will remain at 90–95 rubles.

Controlling the ruble exchange rate and its stability cannot be achieved through export earnings alone, Yulia Makarenko argues with her colleague.

— To establish a balance between imports and exports, a wonderful tool was invented - bonds in foreign currency, in particular in yuan, as was widely announced six months ago. This measure will attract capital to companies and ensure freer movement of funds in foreign currency, which means it will reduce volatility and become an effective measure against rare currencies settling as dead weight in the accounts of Russian companies,” she explained.

In her opinion, this idea should be actively promoted in business circles and support from the state should be ensured in the process of issuing securities.