The Russian ruble is so strong it could hurt the country’s businesses, which depend on exports, the country’s economic development minister warned on Wednesday.
After reaching an all-time lowafter Russia sent troops to Ukraine at the end of February, the ruble has made a stunning recovery, reaching its this month since May 2015.
The official exchange rate of the Russian Central Bank was 52.9 rubles per dollar on Wednesday. While the exchange rate is seen by some as a sign of Russia’s compliance with Western sanctions, the strong ruble is making Russian exports more expensive.
“I think my colleagues will confirm that the profitability of many industries, even export-oriented, has turned negative at the current exchange rate,” Economic Development Minister Maxim Reshetnikov said through Russian news agencies.
“If such a situation continues for a few more months, I think that many companies will not only come up with the idea of curtailing investment processes, but also that they will have to adjust current production plans and reduce production volumes,” he said.
Elvira Nabiullina, head of the central bank, suggested this month that Russia should broadly refocus its economy and not rely on export earnings.
Import “collapse” sanctions
An important reason why the ruble has:this year, rising oil and natural gas prices have enabled Russia to bring in billions of dollars from commodity exports. At the same time, broad sanctions are causing Russia to buy less imports from abroad.
“Aside from rising export earnings, we have a collapse in Russian imports due to Western sanctions,” Tatiana Orlova, chief emerging markets economist at Oxford Economics, recently told CBS MoneyWatch.
Earlier this year, Russia’s central bank imposed capital controls to prevent money from leaving the country, including a ban on foreign holders of Russian stocks and bonds from taking dividend payments out of the country and a requirement that exporters put in some of their excess capital. convert rubles. The bank has gradually relaxed conversion requirements as it aims to bring the ruble’s value to a more favorable level.