By Vestnik Kavkaza
The ruble is almost freewheeling; by the end of the year the limits of the dollar-euro basket will be eliminated; the Bank of Russia will increase the key interest rate. According to PRIME, which cites the first deputy chairman of the Russian Central Bank, Sergey Svetsov, after launching a regime of ruble free floating, investments of the CB on the exchange market will be substituted by operation of refinancing of banks in foreign currency. The Bank of Russia hadn’t provided interventions for stabilization of the ruble since June 18th by the end of September; however, on October 1st the CB continued to support the national currency, which had fallen by 24 percent since January.
Andrey Lisitsin, a senior scientist of the Institute of Public Legal Studies, thinks that “a shift to the ruble free floating ties the hands of the Central Bank in the sense of providing the market with liquidity and regulation of the ruble exchange rate. On the other hand, it makes the economy more market-oriented, while relations are more transparent and clear for an analysis.”
As for the consequences of the ruble falling for the real sector of the economy, Lisitsin says that enterprises are threatened by growing risks and a growth of prices of using basic instruments: “There is another aspect which is directly connected with the development of industry. It is purchasing of equipment, vehicles, the basic instruments which are needed for development of production. Even if the sector is full of them, apparently it is due to debt financing, for example, leasing. Considering the fact that equipment is purchased from abroad, leasing payments depend on exchange rates. So prices will grow in the sphere. The factor will also lead to a growth of margins; in some cases it could lead to bankruptcy. It will be very difficult to take a new loan or insure currency risks in the context of restricted liquidity,” Lisitsin says.
According to him, a fall effective demand directly damages all producing sectors, as the final consumer is a person anyway.
But the main consequence of the ruble falling will be a decrease in the consumer’s trust and an attempt to shift to non-ruble assets, Lisitsin stresses: “House property is one of ways to avoid ruble assets, especially if one could get a ruble loan, it would be a beneficial decision for a consumer. However, there is a clear attempt to shift to foreign currency assets. If it wasn’t made beforehand, apparently, a consumer will have losses. I think it is very important to explain this to consumers: today it is more profitable to buy goods and house property, i.e. to invest money in real assets in Russia, rather than to buy foreign currency in a commercial bank.”
