Nabiullina called restrictions on the withdrawal of rubles from the country ineffective

The HEAD of the Central Bank, Elvira Nabiullina, explained why restrictions on foreign exchange transactions may not have an effect on the ruble exchange rate. Last year they worked together with other fundamental changes in monetary policy and the balance of payments Elvira Nabiullina

The introduction of restrictive measures on foreign currency transactions, including restrictions on the withdrawal of rubles abroad, may not have an effective impact on the ruble exchange rate. This was stated by the head of the Central Bank, Elvira Nabiullina, at a press conference following a meeting of the Board of Directors of the Bank of RUSSIA.

“The transfer of funds to a foreign bank does not in itself create demand for currency. Demand arises at the moment when this currency is purchased. Demand can only be influenced by increasing the attractiveness of the ruble as a store of value. And, by the way, it doesn’t matter for the exchange rate whether rubles are converted from a Russian account or from a foreign one. Incentives for this conversion are important,” Nabiullina said.

Earlier, the head of VTB, Andrei Kostin, in an interview with RBC, proposed closing loopholes for withdrawing money abroad, in particular, paying attention to money transfers in rubles. “We need some additional actions [to support the ruble] in addition to what we are used to doing. For example, loopholes remain. Let's say you decide to transfer money abroad: restrictions have been introduced on $1 million per month, and in rubles - transfer as much as you want. What happens next? You transferred a billion to Armenia, and it is immediately returned in exchange for dollars. This opportunity needs to be closed, for example,” Kostin said. He proposed setting a threshold for such operations at 100 million rubles. Nabiullina replied that she considered this measure ineffective.

Why capital controls won't help the ruble

Other measures, in particular a return to the mandatory sale of foreign currency earnings, will not have a significant impact on the ruble , as follows from the words of the head of the Central Bank.

Read PIONERPRODUKT .by An effective way to relieve muscle tension: 5 exercises with a roll Mom doesn’t want anything: how parental depression affects a child Five ways to relieve tension What the Simpsons series inspires and how we need to live in times of media viruses

“Having sold their foreign currency earnings, exporters can buy it back in the quantities they deem necessary. As a result, the turnover in the foreign exchange market will increase, but the balance of supply and demand for currency will not change. At the same time, this will create inconvenience for companies for which revenue is needed to purchase imported equipment, costs for additional conversion, but this will not have a significant effect on the exchange rate,” Nabiullina explained. She added that the share of sales of foreign exchange earnings in the market by exporters remains high. At the same time, a significant part of their revenue, about 42%, is already in rubles.

Репатриация валютной выручки не означает, что на величину вернувшихся в страну средств вырастет предложение валюты на российском рынке, отметила глава ЦБ: «Вне зависимости от того, где вы храните сбережения этой валюты, в иностранном банке или в российском банке, ее на рынке не прибавится. Она будет храниться на валютных счетах в российском банке, и на курс это не окажет влияния».

Currently, companies are forced to build various complex chains of foreign economic activity and payments that allow them to bypass restrictions, says Nabiullina: “If we try to close more and more new loopholes (of the money transfer business -), for example, limit the transfer of rubles abroad, then these ineffective restrictions will grow like a snowball. We will close something, business will find a new gap, and so on ad infinitum.” In her opinion, only economic incentives, adequate loan costs and a tax system structured in such a way as to not reduce the need to sell foreign currency to pay taxes through transfer pricing are effective in restraining the ruble exchange rate.

Last year, at the peak of the crisis, the Central Bank introduced numerous currency control measures, but along with them there were dramatic changes in other areas. “They could have given some result, but we introduced them together with other measures and we see that our analysis shows that the main result was associated with the prompt reaction of monetary policy, a sharp rise in interest rates, then this was supported by the dynamics of exports and import. EXPORT revenues have increased sharply, while imports have decreased significantly,” Nabiullina said.

In March 2022, the Bank of Russia introduced restrictive measures on currency transactions for individuals and legal entities. These include restrictions on the issuance of cash currency from existing deposits, on the export of cash abroad, restrictions on the amount of currency transfers abroad, etc.

In the first half of 2023, transfers abroad decreased by approximately half compared to the second half of last year, Nabiullina said in July. According to her, this year their volumes remain virtually unchanged from month to month.