Russia's Ministry of Economic Development: market of offshore rubles formed

Maria Novoselova / Vestnik Kavkaza

Problem of ruble volatility in new conditions cannot be solved with old methods, Chinese model needed - Reshetnikov

The problem of high ruble volatility and inflation cannot be solved only with the key interest rate or by resorting to standard methods of currency control, so it is necessary to study the Chinese model, where the yuan market is divided into internal and external, and to implement a similar approach in Russia while maintaining a single exchange rate for the ruble, Russian Economic Development Minister Maxim Reshetnikov said.

Simply imposing mandatory sales of forex earnings by exports will also not solve the problem, as such sales are already at a high level, he said.

"The situation is far more complex than just bringing back mandatory sale of forex earnings or not, because bringing it back in its previous form will do little, it will then be necessary to dictate the mandatory return of specifically forex here. Then the question arises of why did we switch all trade to rubles?" the minister stressed.

For the past five or six months, Russia has had about 85% of forex revenue returning and being sold.

"The situation is due to something else, that we have 35% returning in rubles. We've been active, after all, and remain in favor of switching trade to national currencies. So exporters are actively taking these rubles and returning. The question is where and how they take them, and what kind of market has formed of essentially offshore rubles that are circulating abroad," Reshetnikov said.

The ministry believes that Russia needs to probably do something similar to the Chinese model, "where there is a kind of membrane between the domestic ruble market and the foreign ruble market." 

"As a result, we will have increasingly more rubles there that will play against, let's say, be involved in forex games against the ruble," Reshetnikov said.

"The situation is complicated. We are primarily waiting for proposals from the Central Bank here, because if we don't do anything and only rely on the toolbox that we have, foremost regulation of the key rate, we will have the real sector of the economy held hostage and the very same supply-side economy.

"Because we will be constantly playing this interest rate against forex speculators and as a result hurt investment lending," Reshetnikov said.

© Photo :Maria Novoselova / Vestnik Kavkaza