- Ruble has weakened 9% this year as businesses leave Russia
- Plan to limit hard-currency purchases to smooth ruble trade
According to Bloomberg article published on April 17, 2023, Russia is seeking a way to curb the impact of a foreign investor exodus on the ruble, which has fallen to a one-year low.
A series of asset sales by firms from countries opposed to Russia’s invasion of Ukraine have helped weaken the ruble by 9% against the dollar this year, the worst performance among emerging-market currencies after the Argentine peso.
In reaction, the Bank of Russia and the government are developing a mechanism to set a limit for hard-currency purchases by foreign companies exiting Russia, the Finance Ministry said on Monday. Daily Vedomosti first reported the story.
The cap can be floating and depend on the situation on the market, the ministry’s press service said in its response to questions from Bloomberg News. “Decisions always take into account market conditions in order to avoid destabilization of the foreign exchange market,” it said.
Since there are already a number of approved foreign-firm exits in the pipeline, the central bank wants to avoid sharp jumps in the ruble and is hence planning to step up regulation, according to a person familiar with the thinking, who spoke on condition of anonymity to discuss matters that aren’t public.
According to another person familiar with the plans, Russia is likely to set a limit on the foreign-currency purchases for each deal on an individual basis during the approvals stage, and is unlikely to introduce any general rules or announce official caps.
The Bank of Russia hasn’t responded to a request for request.
The ruble has been weakening since the beginning of the year as a recovery in import volumes and a series of foreign asset sales fueled demand for foreign currencies. On the other hand, dollar liquidity on the Moscow Exchange is low while export revenues decline amid sweeping sanctions over actions in Ukraine.
Under Kremlin rules, introduced during the war, foreign investors from countries opposing the conflict are banned from selling their assets in Russia without approval from a special government commission. To get the green light, they are obliged to sell businesses at a discount of at least 50% of market value and pay a contribution to Russia’s budget.
So far this year, deals have included Norway’s Wenaas Hotel Russia AS selling to Sistema PJSC for €200 million ($218 million), the disposal of 11 Henkel AG & Co. plants and the Russian operations of Nokian Tyres.
