Friday, July 22, 2016

They’ll take on poorly: Why did the authorities oppose the strengthening of the ruble – Russia Oil

«Oil of Russia», 22.07.16, Moscow, 17:47 The ruble has risen too high and now poses a danger for economic recovery. repeated politicians, economists and experts on this all week. They unanimously urged the Central Bank to weaken the Russian currency to exporters receiving higher profits and replenish the budget. ordinary consumers interests in the discussions were not mentioned.

excessive efforts

«From my point of view, the ruble begins today pereukreplyatsya “- said on Thursday, July 21 Russian presidential aide Andrei Belousov. According to him, the growth of the national currency – is one big disadvantage: the budget loses income, and domestic manufacturers and farmers lose competitiveness. In addition, the import substitution program is undermined

The strengthening of the ruble -. Main economic theme of the outgoing week in Russia. It raised the experts and politicians, and it reached to the highest state level.

On Tuesday, July 19, President Vladimir Putin at a meeting with Prime Minister Dmitry Medvedev said that the authorities should take into account the factor of increase of the national currency in its future work.

the next day expressed a business ombudsman Boris Titov.

«For the economy, which should seek to reduce costs in the growth stage is more profitable to have a rate lower you install the real effective ruble exchange rate “, – he said

The next speaker was the deputy chairman of Vnesheconombank Andrei Klepach also usmotrevshy in a strong ruble threat of import substitution.. In the fall of the dollar on one ruble of budget loses 160 billion rubles a year, it is estimated

Fortress -. 22 percent

The ruble against the dollar significantly increased compared to the first months of 2016. In February, at the peak of the US currency gave 78.4 rubles, it is now trading at around 64 rubles. In just a few months the national currency has strengthened by 22 per cent.

The ruble is in free swimming for almost two years. Until November 2014 the Bank of Russia conducted foreign exchange intervention – was spending foreign exchange reserves of the state to maintain the ruble exchange rate. It was decided to let go for the sake of conservation reserves. In early 2014, their volume reached 510.5 billion US dollars by the end of the year they fell to 418.9 billion. The size of 1 July 2016 – 392.8 billion dollars

Today, the ruble pressured two powerful factor.. The first – a purely domestic – is associated with the onset of the dividend and the tax period in Russia. Company-exporters sell currency earnings to buy rubles and to fulfill obligations, respectively, to the shareholders and the state. As a consequence – increase in demand for the Russian currency which is forcing up the course

The second factor -. External. Oil prices fluctuate at the level of 46-47 dollars per barrel, there is a tendency to drop in prices.

The floating ruble is between these two factors. While the first is stronger, but its effects runs out in August. Then the national currency will return under the rule of the oil.

Exporters against the ruble

The floating ruble exchange rate is detrimental to prospects for economic recovery in Russia, indicated by Bloomberg in early July. Against the background of the strong strengthening of the national currency decline in GDP occurred (except in February – then no growth was recorded). Suffer primarily exporters, and they are very important for the economy of the state.

«Exporters play an important role for the budget. Strengthening of course reduces their ruble revenues and reduces their ability to maintain revenue coffers, “- he said in an interview with” Lentoy.ru “chief economist at Alfa Bank, Natalia Orlova

Advisor on Macroeconomics general director of brokerage house”. Opening of “Sergey Hestanov recalls that the budget is 43 percent dependent on exports.

« that’s a lot. And when you consider businesses that service exporters – will be even more “, – says the expert

Forced easing

In the matter of deliberate strengthening or weakening. the ruble is all about the Bank of Russia and its authority over the foreign exchange reserves. Of course, if the government need to quickly stabilize the exchange rate, you can enter the hard currency control and fix it at a certain point. But this is too radical option, suitable for most crumbling economies like Venezuela and Turkmenistan. And it is not a means of salvation, but as a tool to quickly get rid of agony

The soft alternative -. Currency intervention. Central Bank can enter the market and start buying dollars in reserves. Thus solved two problems at once: increased own reserves (the regulator is the goal – to increase them up to $ 500 billion, that is not enough more than 100 billion) and the weaker ruble (as a result of interventions in demand for the dollar will grow, along with its course)
Several high-ranking persons almost simultaneously turned to the Bank of Russia with a request to influence the ruble. Belousov said that all the necessary tools that can weaken the Russian currency, are in the hands of the Central Bank. Titov said that the regulator should reduce the volatility of the ruble. Klepach called to restrain its course.

Tools idle

However, the Bank of Russia does not listen to this advice. Free rate of the national currency – an effective regulator of the economy, I am sure the regulator. “The floating exchange rate is the mechanism that allows you to balance the interests of different economic operators, including importers and exporters”, – told in the CB

«Any measures of influence on the course -. Intervention or exchange controls – automatically reduce the credibility of the Central Bank policy. This will cause serious damage to economic growth “, – warns Natalia Orlova

« Not very logical and correct to artificially weaken the ruble, especially after already held a strong devaluation.. At the current stage it is important to launch investment projects focused on the domestic market, requiring the involvement of the ruble mass investment, “- says associate professor of the Institute of Business and Business Administration under President Emil RANHiGS Martirosyan

On the Population no one remembers all those discussions. . People are accustomed to floating ruble, he said in February the head of the Central Bank Elvira Nabiullina. Since then, and it is believed that the life of Russian ruble fluctuations have no effect.

Russia has not yet implemented the program of import substitution and heavily dependent on foreign supplies. Especially consumer goods. Basically country sells oil and gas purchases – machinery and equipment. According to customs data, in second place in the structure of imports – food and drink, and then – drugs, cars and clothes

Therefore, a strengthening of the ruble could help the population, and the economy as a whole due to the growth. consumer demand. Turnover of retail trade fell in June by 5.9 percent, while the growth of nominal wages to nine percent reported in Alfa-Bank. In such circumstances, the strengthening of the ruble – the well-being of the population growth factor. But while preference is given to exporting companies – apparently they are more important for the state

Marat Seleznev Learn more at http: /. /www.oilru.com/news/525416 /

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