By Evgeny Ogorodnikov
The ruble last week tested a three-digit value. True, it stayed at a level above 100 rubles per dollar for a short time, the very next day, in response to the loss of support by the ruble, the Central Bank held an emergency meeting and raised the rate immediately by 3.5 percentage points, to 12%. This did not help the ruble very much: after the announcement of the decision of the Central Bank, it strengthened only to 99 per dollar. However, after that, 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 convened between President Vladimir Putin and the government. This had an effect, the ruble began to strengthen, and on Thursday, August 17, the rate went below 94 rubles per 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 national currency exchange rate was around 60 rubles per dollar, which negatively affected the profitability of exports of oil, agricultural products, timber processing and metals. At the same time, the main variable that determines the size of Russian exports, the price of oil, was below $60 per barrel during this period, taking into account discounts. By the way, the key rate at that ruble exchange rate was at the level of 7.5%. No one, except the Ministry of Finance and exporters, was saddened by such parameters of the economy. There was a construction boom in Russia, an unprecedented growth in industrial production, an increase in wages and GDP.
Today we have the following parameters: Urals oil is above $70 per barrel, the key rate is 12% and the rate is under 100 rubles per dollar. Obviously, in the current conditions, neither the price of oil nor the Central Bank rate directly affect the ruble exchange rate. However, the rate affects the rate of economic growth. To put it simply, 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 the price of oil doubling in rubles will be resolved.
The extreme fluctuations of the ruble that have occurred in the last 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 per dollar (the corridor designated by Deputy Prime Minister Andrei Belousov, who oversees 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 couple of 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 borrowings. The problem is in 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 foreign exchange market in the classical sense in Russia has ceased to function. The liquidity of trading in the ruble-dollar and ruble-euro pairs has fallen significantly. Low liquidity means exposure to various kinds of manipulation. That is, even with a limited supply of rubles (not the same as on the balance sheets of Sberbank or VTB), you can set the “necessary” ruble exchange rate. That is why, only on rumors about certain measures by the government or the Central Bank, the exchange rate changed by 2-3 p.p. per day.
There are two reasons for the drop in liquidity in the market. First, the largest Russian liquidity conduit banks are cut off from access to the dollar and the euro. 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 in limits (or such a 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.
Plus, companies that have dollar revenues often prefer not to bring it to Russia, since many Russian enterprises need “non-sanctioned” dollars and euros to fulfill their external obligations, purchase sub-sanctioned equipment, etc. At the same time, importers and tourists live in old world dollar and euro.
All this was superimposed on a rather rigid schedule of payments for external obligations of Russian companies. Prior to the start of the NDC, over 98% of all business liabilities for external debt 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 this is an outflow of 90-130 billion dollars a year in the coming year. In addition, there is also the repurchase of shares and shares from businesses leaving Russia, the payment of dividends to investors from friendly countries, the transfer of earnings earned in Russia by migrants to their homeland, etc.
In many ways, all the indicated problems are temporary. The observed cash 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 external debt of Russian business will sooner rather than later be repaid, the shares of investors leaving Russia have been bought out, and resource prices tend to rise. Moreover, even the current volume of exports from Russia is more than enough to satisfy all the requests of Russians for imported consumer goods and holidays abroad, the purchase of equipment for business, and there are still surpluses for the formation of gold reserves.
Quite adequate measures are ripe for stopping the crisis. One of them has been implemented: exporters voluntarily agreed to saturate the domestic market with foreign currency. However, the solution is temporary. The solution is more systemic — creating tools for converting local currencies into dollars and euros that are scarce for Russia in external jurisdictions, as well as infrastructure for converting these currencies into each other, into rubles and vice versa. Both Russian business and the government, as well as external counterparties, are interested in this: a state that can build in a freely convertible currency instrument will create a real alternative to the US dollar.
And most importantly, the Russian Central Bank must still recognize the fallacy of its monetary policy and in the currency fuss do not forget to return the rate to its previous level very soon.
this article orginally appeared at exper.ru