President Vladimir Putin is preparing to get down to the nitty-gritty of the spiraling rouble. Despite a striking 3.5 percentage point uptick in interest rates, the Russian currency continues its disheartening plummet.
With all eyes on Putin and his subsequent moves, a new course of action is in the offing.
Steering Currency Control: A Double-Edged Sword
In an imminent discussion with Russian policymakers, Putin is set to explore stringent currency control measures. Top on the agenda? Proposals targeting the nation’s exporters, a significant chunk of whom park their foreign currency earnings overseas.
The buzz in the corridors of power suggests that these exporters may soon be under obligation to exchange a substantial portion of these earnings – up to 80% – into roubles within a 90-day post-delivery window. F
irms that decide to play truant could find themselves ousted from government subsidy schemes, a stiff penalty by any measure. But that’s just scratching the surface.
Other potential policy changes include curtailing the outflow of dividends and loans to international shores, axing import subsidies, trimming down on currency swaps, and constricting the volume of foreign currency that exporters can transfer out of Russia.
It’s evident that Putin’s administration is pulling out all the stops. Amplifying currency controls, especially after Russia’s aggressive stance in Ukraine last year, speaks volumes about the increasing trepidation within Kremlin walls regarding the war’s economic repercussions.
Questioning the Efficacy of Recent Economic Maneuvers
Anton Siluanov, the Finance Minister, might have been the lone voice championing these controls during a recent governmental assembly. Still, his perspective is clearly gaining traction, given Putin’s scheduled rendezvous with policy framers.
Their mission? To bolster the beleaguered rouble, especially when a sharp hike by the central bank barely made a dent in exchange rate figures.
The fact remains that any significant policy alteration will invariably have Putin’s fingerprints all over it. After all, in Russia, the buck does stop with him. The rouble’s trajectory is cause for concern. On one occasion, it even dipped below the significant benchmark of 100 against the dollar.
The economic storm isn’t relenting either, with the nation grappling with escalating deficits spurred on by a rise in military expenditure, dwindling export revenues, and an increasing tilt towards imports.
Western sanctions are adding insult to injury. The clampdown has effectively immobilized a whopping $300 billion of Russia’s foreign reserves, hamstringing the central bank’s capability to give the rouble a much-needed shot in the arm.
While the Kremlin and finance ministry have maintained a stoic silence, choosing not to comment immediately, the world watches with bated breath. Russia is at a crossroads, and Putin, with his indomitable spirit, is undoubtedly gearing up for the challenge.
It’s clear as day; Russia’s economic landscape is on shaky ground. With Putin at the helm, radical policy shifts are par for the course. As the nation grapples with economic headwinds, its leadership’s moves in the coming weeks will be under the global scanner.
Only time will tell if these policy shifts can help steer Russia away from further economic turmoil. But one thing’s for certain – Putin isn’t one to back down from a challenge.
