Moscow

Russia may partially reintroduce capital controls to prevent the rouble from falling to levels not seen since the start of the Ukrainian conflict, according to a Bloomberg report.

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According to four persons with knowledge of the discussions who asked to remain anonymous, the mandated selling of export revenues was addressed at a meeting on Monday before the Bank of Russia announced an emergency rate hike. According to two of the attendees, no progress was made and a subsequent meeting may be scheduled for this week.

After the rouble temporarily crossed over 100 to the dollar for the first time since March of last year, the Bank of Russia increased its benchmark rate from 8.5 per cent to 12 per cent on Tuesday. The rouble appreciated after the rate hike before losing ground. 

Forced sales of export income, along with other actions including restrictions on foreign currency transactions between banks, had assisted in halting the rouble’s decline after the conflict began in February 2022. 

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With a loss of almost 25 per cent, the currency is now among the three worst performers in emerging economies this year. 

According to Sofya Donets, an economist at Renaissance Capital, it may take many months for the rouble to strengthen in the absence of additional measures like central bank interventions or mandated sales of export income.

Presently the majority of the central bank’s reserves are frozen due to the sanctions; therefore, policymakers are not eager to enter the currency market directly.

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(With inputs from agencies)

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